We already have significant director liability provisions in Corporations, Occupational Health and Safety and Taxation legislation.
In October the Federal Government introduced legislation which will significantly extend the scope for liability of directors and their associates in the taxation and superannuation areas.
In releasing the legislation, the Government stressed the need to –
- crack down on companies which ignore their tax and superannuation responsibilities to obtain a competitive advantage over other businesses and
- protect workers entitlements
by “ensuring every Australian business plays by the rules”.
Under the current legislation, company directors receive a warning and a period of notice before becoming personally liable for company tax liabilities. That will no longer be the case. The ATO will be able to take action against directors without prior notice where a company’s pay as you go (“PAYG”) withholding tax or superannuation guarantee obligations are unpaid for three months.
It is very likely that this proposed legislation will become law. It will have significant implications for –
- Companies with existing PAYG withholding liabilities. Ideally they will need to deal with those liabilities in one of the presently allowed ways before the new legislation takes effect;
- People offered directorships will need to make due diligence enquiries before accepting appointment at the risk of otherwise becoming liable for unpaid tax or superannuation amounts due before they accepted appointment; and
- Existing asset protection strategies. The proposed legislation extends to directors and their associates. This term includes relatives, partners, spouses and children. This will require all directors to review whatever asset protection strategies they might have in place before the legislation becomes effective.
At Everingham Solomons we have the expertise to assist you with these issues and all your other corporate and business legal issues because Helping You Is Our Business.
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