Unpaid Company Super Debt means trouble for Directors – ATO crackdown begins in October 2013 with Lockdown DPNs
You are probably aware that the ATO’s power to pursue unpaid superannuation underwent some significant changes in June 2012. The ATO was given new powers to expand the DPN regime from just PAYG deductions to include Superannuation Guarantee amounts (“SG”) and make directors automatically personally liable if PAYG or SG amounts remain unpaid and unreported three months after the due date for lodging a return.
The ATO has been focusing on education rather than enforcement. That period of leniency has come to an end. This month the ATO will start sending warning letters to directors of companies with superannuation guarantee debts.
The new DPN laws – a summary
Let me explain the situation. The old laws still apply and so, yes, a Director may still receive a DPN giving them 21 days to act or be personally liable for the amount shown on the DPN. So, the new laws are on top of the old laws and they:
- Expand the DPN regime from just PAYG deductions to include Superannuation Guarantee amounts (“SG”);
- Make directors automatically personally liable if PAYG or SG amounts remain unpaid and unreported three months after the due date for lodging a return and a director cannot cause their director penalties to be remitted by placing their company into administration or liquidation;
- Allow the ATO to now serve a copy of the DPN at the Tax Agent’s address, so you’ll want to watch for that!
- Have effectively backdated the director personal liability for existing PAYG liabilities if the amounts are already unpaid and unreported for three months after the due date of the return.
It’s not well known, or at least not well practiced, that if a company cannot meet its superannuation obligations, the ATO requires the company to submit a Superannuation Guarantee Charge Statement. If the company is more than three months late in submitting this statement to the ATO, the directors can be held personally liable for the unpaid amount.
Advice for your clients
Here is our general advice on what to do if a Super Warning Letter or DPN is received:
- If the company can pay the debts then it should do so in order to avoid personal liability for the director.
- If a DPN is received with a 21 day Notice period (old law), then react and do so, yes, within 21 days.
- Directors should get their company Tax Returns, including a Superannuation Guarantee Charge Statement, up to date and lodged. If a company can’t pay the PAYG or Super liability, it should lodge the returns anyway or a director risks incurring a Lockdown DPN and therefore automatic personal liability.
- If PAYG debts and Returns are already 3 months late either pay the debt or get the company into liquidation. If reporting is out of date, a liquidation won’t guarantee the director won’t hear from the tax office again, but it is their best chance to move the company, and the director personally, to the bottom of the Enforcement Action pile.
We have a Director Information Sheet that has the above and more information.
Hopefully you have heard that Dissolve conducts Creditors Voluntary Liquidations for a fixed fee starting at $5,750 if referred by a Public Accountant or Lawyer. So please feel free to call us if you would like to enquire about a liquidation or if you would like specific advice on the new DPN laws.