Director penalties and tax debts

Directors Penalties and Tax Debts

There have been a number of developments recently in the area of Director’s Penalties and Tax Debts. In this article Patrick Rowan & Associates review the potential liabilities of business owners and directors.

Director Penalties and Tax Debts

Tax Debts – The Government will now allow the Australian Taxation Office (ATO) to disclose tax debt information to registered credit reporting bureaus. This will generally be the case where there is a debt of $10,000 which is overdue by 90 days and you are not effectively engaging with the ATO to manage the debt.

Directors Penalty Notices – Directors who have unpaid Pay-as-you-go (PAYG) withholding and superannuation guarantee obligations for their employees (including themselves) can and will be held personally liable for these debts. This will be an automatic liability, not just in the case of the company going into liquidation. The laws in this area are being tightened even further from 1st July 2018 to reduce the notice period, so please do all you can to make sure these debts are paid as and when they come due to protect yourself.

PAYG Withholding Obligations

Another recent development is that where a business has a PAYG withholding obligation on a payment, and it doesn’t meet that obligation, the whole amount of the payment will become non tax deductible. That’s right, not just the portion of the payment that should have been withheld, the whole payment. The most common PAYG withholding obligation is from employee wages, so you need to make sure you are withholding the right amount of tax for your employees.

Another common PAYG withholding obligation is for payments to contractors/business where they do not have an ABN. It is the responsibility of the payer (i.e. you) to ensure that the provider of the goods or services has quoted their ABN and it is active. As unfair as it seems, if you are paying someone who is doing the wrong thing, it is your problem, not theirs.


Superannuation Guarantee Amnesty

On 24th May 2018, Minister for Revenue and Financial Services announced a 12 month superannuation guarantee (SG) amnesty period. This is designed to allow employers to self-correct past non-compliance.

Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty and before the commencement of an audit of their SG will:

  • not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
  • be able to claim a deduction for catch-up payments made in the 12-month period.

Employers will still be required to pay all employee entitlements. This includes the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).

If you have any queries on Directors Penalties and Tax Debts, please contact Patrick Rowan & Associates, Accountants Geelong.  Tel: 5221 7655


These materials are intended to be used as a guide only.  They should not be relied upon as a substitute for professional advice regarding actual facts or circumstances.

Patrick Rowan & Associates, its employees and agents do not accept any liability for any injury, loss or damage resulting from any person acting, or refraining to act, in reliance on all or part of these materials.