Newsflash: The ATO’s Director Penalty Bill introduced into Parliament

Today the Tax Laws Amendment (2012 Measures No 2) Bill 2012 was introduced into Parliament which, amongst other things, will extend the potential for personal liability of directors after issue of DPNs to cover their company’s unpaid and unreported superannuation obligations, as well as PAYG. For further detail refer to my earlier post about the exposure draft of this bill here.

Submissions were due on 2 May 2012, after just a 2 week window allowed by Treasury for their receipt, but have still not been made public. This is a notably short timeframe between the deadline for submissions and the introduction of the Bill to Parliament.

You can download a full copy of the Bill here and the EM here.

Revised version of ATO’s Director Penalty draft legislation released

Yesterday the Assistant Treasurer released draft legislation which will introduce revisions to the existing director penalty regime – although not as severe as originally sought. In November last year an earlier version of the legislation had been before Parliament, but was withdrawn by the Government in light of some strong criticisms that it had gone too far – see my post from last year here.

Last year’s version of the proposed legislation would have allowed the ATO to issue proceedings against directors personally for certain company tax liabilities without first issuing a DPN (Directors Penalty Notice), once the liability had remained unpaid and unreported for more than 3 months after the due date. In addition, the tax liabilities for which a director could become personally liable was to to be extended from only unpaid PAYG, as before, to also include superannuation guarantee liabilities.

The latter change has been retained in the new version of the draft legislation, however the former has not. DPNs are still required to be issued to directors before the ATO may issue proceedings against directors personally to recover the relevant company tax liaibilities. Another change to the draft Bill is intended to ensure that new directors have time to familiarise themselves with corporate accounts before being held personally liable for corporate debts. There is also proposed a new defence for directors liable for penalties for superannuation debts where, broadly, they reasonably thought the worker was a contractor and not an employee.

The latest exposure draft of this legislation is again intended to amend the tax law to better protect workers’ entitlements to superannuation and strengthen director obligations, but in a more measured manner. It is also intended to assist in countering phoenix behaviour. The main aspects of the amendments are –

  • extending directors’ potential personal liability for company tax debts to unpaid superannuation guarantee amounts;
  • ensuring that directors cannot have their director penalties remitted by placing their company into administration or liquidation when unpaid PAYG withholding or superannuation guarantee amounts remain unpaid for 3 months; and
  • restricting access to PAYG withholding credits for directors and their associates where the company has failed to pay withheld amounts to the ATO.

You can read the Assistant Treasurer’s press release here and the announcement on the Treasury website here. Note that on the latter webpage, there are links to the exposure draft bill and explanatory memorandum, as well as a “summary document” which sets out industry concerns raised in relation to the previous version of the Bill, and what Treasury’s response has been on each point in the new version. Treasury has called for public consultation and submissions, which are due on 2 May 2012.