Are you currently a director of a company or thinking about taking on a directorship of a company?
Did you know you can be personally liable for certain debts of the company? Read on to find out more.
If you are, or become, a company director and the company has outstanding PAYG withholding and SGC obligations, you may become personally liable for a penalty equal to these amounts (these are called director penalties). Below are some helpful tips to safeguard your personal assets:
Before you become a director – Make sure you do your due diligence and check if the company has any outstanding debts or lodgements with the ATO. A new director has 30 days starting from the date of appointment to either:
- Ensure the company pays their PAYG and/or SGC debt in full.
- Appoint an administrator.
- Initiate the wind up of the company.
As a current director - You are responsible for making sure the company meets its PAYG withholding and SGC obligations. If your company fails to meet a PAYG withholding or SGC liability in full by the due date you may become personally liable for director penalties equal to the unpaid amounts.
If you are no longer a director – Even though you may no longer be the director of a company, you are still liable for director penalties equal to the unpaid PAYG and SGC of the company due before your resignation. This can also include PAYG and SGC occurring in the quarter before your resignation.
Recovering director penalties – The ATO may issue a Director Penalty Notice (DPN) outlining unpaid amounts and remission options available. Recovery options include:
- Offsetting any of your tax credits against the director penalties.
- Initiating legal recovery proceedings against you to recover the director penalty.
If the company enters into and maintains a satisfactory arrangement to pay the entire company debt, the ATO may not seek to recover the penalty from you personally; however, they may offset your personal tax credits.
Defences not permissible – Even, if as a director, you are not personally involved with the day to day management of the company, you can still be personally liable for the company PAYG and SGC debts.
If you are considering becoming a director, or have been asked to and are worried about the consequences, please get in contact with us today.