Tax liabilities that could attract a DPN may be one or a combination of the following:
• Unpaid GST, Capital Gains Tax and Income Tax
• Unpaid Pay-As-You-Go Tax (PAYG)
• Superannuation Guarantee Charge (SGC)
Directors of companies who fail to pay their tax liabilities will receive a DPN, and should do one of the following:
• Pay the outstanding tax debt;
• Appoint a voluntary administrator or liquidator to the company.
Jamieson Louttit from Jamieson Louttit & Associates said the worst thing to do is ignore the notice. “The consequences with failing to comply with the notice within 21 days of being issued with it may result in you being personally liable for the company’s tax debts; effectively ‘piercing the corporate veil.”
Business Activity Statements (“BAS”)
The laws have changed since 30 June 2012 and this could adversely affect the director’s personal liability. Prior to the change, you could not be personally liable as a director for the company’s tax debt if you had complied with the DPN.
However, in June 2012 the law changed. Now even if you comply with the DPN you could still be personally liable for the company’s tax debt if the company does not lodge its BAS to the ATO within three months of the due date.
Director’s Associates (e.g. spouse and children) Personal Liabilities
The personal liability has also been extended to include the director’s associates such as the director’s spouse and children. In these situations, the associates may become personally liable for PAYG tax which has been withheld from wages paid to them by the company but was not remitted to the ATO. The PAYG claimed will be reversed and will have to be paid by the director’s associates personally.
Minimising Personal Liability
If you have received a DPN, it’s imperative that you act immediately and consult an advisor to:
1. Ensure that all BAS are lodged within 3 months of the due date.
2. Ensure that PAYG tax and SGC are appropriately and correctly accounted for.
Bartercard members can directly discuss their situation and issues with an insolvency practitioner/Liquidator.
Author: Jamieson Louttit
Jamieson Louttit & Associates
88 Pitt Street
Sydney NSW 2000
P (02) 9231 0505
F (02) 9231 0303