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UPDATE FOR PUBLIC ACCOUNTANTS: Seven Good Reasons For directors to Stay Up To Date With Company Tax Lodgements

UPDATE FOR PUBLIC ACCOUNTANTS: Seven Good Reasons For directors to Stay Up To Date With Company Tax Lodgements

March 27th, 2018 : by Brad Vincent

This a special blog for Public Accountants.  We are going to go out on a limb and guess that you have some corporate clients that cause their BAS and IAS lodgements to be made late.  That’ll be largely as a result of the client not getting the necessary information to you on time, or maybe they can’t pay the debt so they think it is best not to lodge.

Well, there are now at least seven good reasons (and growing!) why your clients should stay up to date with their company tax obligations. At the bottom of this post we have linked to a handy Director Information Sheet you can hand out to your clients. Here is a summary, with some additional technical information for you:

1. The traditional (and still valid) 21 Day Director Penalty Notice (DPN) 

You may already know that where a company has a Pay As You Go Withholding (PAYG) or Superannuation Guarantee Charge (SGC) debt, then the ATO can issue a DPN giving the director 21 days’ notice of the impending personal liability, giving some options that will result in the Penalty being “remitted” (effectively cancelled). We’re seeing a lot more of these in the last six months.

2. The newer “Lockdown” DPN

Less well known are the Lockdown DPNs, introduced in June 2012, that apply where a company has not lodged its BAS return (for PAYG) or Superannuation Guarantee Charge (SGC) statement (for super) within 3 months of its due reporting date. The Lockdown DPN informs the director that they are instantly personally liable for the amount on the DPN – liquidation will not help them avoid personal liability.

3. Single Touch Payroll is coming

By July 2019, the ATO require all employers to switch to a Single Touch Payroll enabled system that automatically sends payroll information to the ATO. This will mean the ATO will know very quickly which businesses are not complying with their tax requirements.

4. The “amendment” trap

We are aware of a matter where a company was struggling to pay its BAS debt so lodged a nil or low BAS, in an effort to prevent automatic liability under a Lockdown DPN.  Bad idea!  That BAS was amended outside the 3 month reporting period and the ATO then issued a Lockdown DPN claiming the reporting date is taken to be the date of amendment, not the initial date of submission!

5. Superannuation – the new “audit” focus

In this last few months we’ve had an influx of calls from directors of companies that have had the ATO perform a superannuation audit and DPNs have been issued.  It is now a key focus area for the ATO and it has developed new systems to monitor and pursue non-compliance.

6. Superannuation – beware of proposed legislation

Under current legislation, as long as the BAS or SGC Statements are lodged within three months of the due reporting date, the ATO can only issue the “less bad” 21 day DPN (not a Lockdown DPN).  The Government has just announced plans to strengthen DPNs related to Superannuation Guarantee debts by removing the 3 month grace period giving the ATO the ability to immediately issue a Lockdown DPN for non-payment of a SGC debt and to also introduce criminal penalties for failing to comply with SGC obligations.

7. GST – beware of proposed legislation

Also currently on the discussion table are plans to expand the DPN laws to cover GST!

Why be afraid of items 6 and 7 now?  The most recent news laws for DPNs (June 2012) trickily backdated the Lockdown DPN provisions for PAYG deductions and many directors were caught.  As DPN law reform has been made retrospective in the past, we’d suggest that if a company is at risk, now is the best time to get lodgements up to date!

Putting all that together – what’s our current advice?

The essence of our advice remains unchanged, which is:

  1. Directors should stay right up to date with BAS, IAS and SGC lodgements with two new addendums:
    1. report accurately (to avoid a future BAS amendment);
    2. if the debt can’t be paid, lodge anyway!
  2. If a Director receives a 21 Day DPN, they should act…. within 21 days to either pay the debt or put the company into Voluntary Administration or Liquidation;
  3. If a Company has an existing PAYG or Super debt that is unpaid and unreported for three months after the due date then you should call us immediately to establish whether the director is already personally liable and whether a liquidation may reduce the chances of the director receiving a Lockdown DPN.

Dissolve is the original and best provider of low cost liquidation services. We have been providing advice and liquidation services for nearly 10 years now. Over that time we have amassed a unique insight into the best way to assist companies with tax payment problems.

As always, our friendly experts are available to offer free, confidential advice on your client’s specific circumstances.

The Director Information Sheet is available for download from our website at https://www.dissolve.com.au/directorguide/

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