Directors personally liable for unpaid GST

On the 5 February 2020 the government passed legislation exposing directors to personal liability for unpaid GST. The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 is the next move in a string of legislation aimed at curbing illegal restructuring activities that have the intention of defeating creditors.

The new law will take effect from 1 April 2020, and it’s important that both company directors and their advisors understand the impact of this new legislation.

If you’re a company director, you already know you have a personal obligation to meet your company’s tax obligations in a timely fashion.

In a previous article, Michael Moon discussed the ATO’s increased focus on Director Penalties and the personal liability of directors when it comes to Superannuation Guarantee Charge debt and PAYG withholding.

This latest anti-phoenixing legislation extends this liability to include a company’s unpaid GST. The bill also enables the ATO to estimate a company’s anticipated GST liabilities and recover them personally from the director via a Director Penalty Notice.

The simple upshot? It is increasingly critical for directors to ensure their companies are compliant with all obligations to the ATO – SGC, withholding and GST – or you’ll be personally liable.

While that sounds somewhat obvious, the financial decisions businesses have to make are not always that black and white. We see and hear daily from our clients how easily tax debt can happen, and how insurmountable it can feel.

This legislation is designed to encourage compliance, and further disincentivise illegal restructuring. But, importantly, it isn’t there to punish those who have been genuinely unable to meet their commitments (via cashflow challenges or situations of business hardship), or to hold back those who are genuinely restructuring for positive business reasons.

If that’s you, we can help. At Tax Assure, we are experts at helping you negotiate with and navigate the ATO.

Estimates of GST liabilities will only be made, and recovery started, if you fail to engage or co-operate with the ATO in establishing the overdue and unpaid amount. So getting in touch with them is crucial.

Talk to us today if you (or your clients) need help and support with this new legislation, or with tax debt in general. We’d love to help.