Directors personally liable for company’s GST liabilities from 1 April 2020

March 4, 2020

From 1 April 2020, company directors can be personally liable for their company’s outstanding GST.

This is an extension to the existing director penalty regime that allows the ATO to collect unpaid Superannuation Guarantee Charges and PAYG liabilities from directors personally.

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 received royal assent on 17 February 2020.

The new measures introduced in this bill will first apply in the quarter starting 1 April 2020.

The amendment extends the Estimates Regime and Director Penalty Regime under the Tax Administration Act 1953 to include liabilities for GST, luxury car tax (LCT) and wine equalisation tax (WET). As a result, the Commissioner of Taxation will be able to collect GST, LCT and WET based on estimation from the effective date. The amendment also entitles the Commissioner to issue a Director Penalty Notice to company directors for unpaid GST, LCT and WET by the company.

DAA Comment

Following this amendment, it is important for company directors to pay close attention to their company’s reporting and payment obligations on an ongoing basis, especially in larger corporations where directors may not have direct oversight in monthly or quarterly compliance activities. To avoid personal liability for currently unpaid GST, company directors need to ensure all GST payment deadlines are met before 1 April 2020. If there are difficulties paying the current GST debt in full, directors of a company should actively engage with the ATO to discuss a repayment arrangement.

Should you have any concerns regarding above changes in the tax law, please feel free to contact us.