by Patrick Coetsee
In July 2012, changes were made to the Directors Penalty Notice regime. The changes were introduced in an attempt to make sure that companies remain compliant with the reporting and remittance of their PAYG and Superannuation obligations. They also bring increased liability for companies and further personal exposure of directors.
Recently, the ATO has been following up organisations that are behind in the lodgement of their Business Activity Statements (BAS)and returns. The crackdown means that many companies and their directors face the possibility of prosecution or fines if they do not comply with their statutory obligations.
What happens if you are late lodging activity statements and returns?
If you are late in lodging returns or activity statements, you will incur penalties and will be charged a daily interest rate of 9.59% on any unpaid amounts
.
If your business receives an ATO compliance notice and still fails to lodge returns, you face the following possible consequences:
• An audit and possible further investigation from the ATO;
• The ATO may estimate your net assessable amount or taxable income, and the tax you owe without further warning;
• You, or your business, could be referred for prosecution without warning;
• If prosecuted and convicted you could be fined up to $8,500 or imprisoned for up to 12 months. For a company the maximum fine is $42,500.
What do you need to do now?
All directors must make sure of the following:
• Any outstanding BAS and PAYG returns should be lodged as soon as possible;
• Pay all PAYG and superannuation charge amounts within the relevant time frames;
• Keep all BAS and PAYG returns up to date and lodged within three months of their due date.
If a BAS return is lodged but PAYG is not paid, the ATO is required to issue a Directors Penalty Notice. At the expiry of the 21 day notice period, you could be held personally liable. A Directors’ personal liability for a company’s unpaid PAYG can be avoided if the company enters into Voluntary Administration, or has a Liquidator appointed before the expiry of the Director Penalty Notice.
If unpaid PAYG is not reported within three months of the due date, the Director will automatically be personally liable for any unpaid amounts, even if the company is placed into voluntary administration or liquidation after this date.
If you are a director of a business, it is very important that you understand your obligations and responsibilities in terms of lodging BAS and tax returns. For more information on Directors Penalty Notices and your potential liability, contact Patrick Coetsee at Kenny Spring Solicitors on ph: 02 6331 2911 or email [email protected].