Directors now Personally Liable for more Company Debts

Dated: September 2011

New laws being proposed will give the Taxation Office authority to start recovery processes against directors essentially without warning if the debt is left unreported for three months after it is due.

The proposals also intend to expand the director penalty notice regime to include unpaid superannuation.

There is some clarification needed over some minor points, but the intention is clear - from 1 July 2011, if companies are more than 3 months late in lodging a BAS or other return, the director can be personally liable for any PAYG withholding or superannuation amounts that should have been declared on that document.

Previously there was a 21-day grace period that could be used to prevent directors being personally liable for company debts. These proposals will eliminate that grace period.

Our advice is that you would be better to lodge the BAS/return than not, even if the company cannot pay it, because there is less chance of the directors being held personally liable. The fact that the debt cannot be paid raises its own problems, which need to be dealt with separately.