In the recent 2011 Federal Budget, the Government made its intentions clear in dealing with “phoenix activities” by Directors.
The term “phoenix activities” is commonly used to describe arrangements whereby a company incurs, but does not pay, various liabilities whilst carrying on business activities.
The amendments proposed are to extend the “Director Penalty Notice” provisions in the Taxation Administration Act 1953 (which currently apply in the main to unremitted PAYG deductions) to include unpaid superannuation guarantee amounts, a change which may result in Directors becoming personally liable for unpaid amounts of this type.
If the legislation is amended in accordance with the budget announcement, Directors may become personally liable for unpaid superannuation amounts merely because of an inability of the company to pay rather than any activity which might be considered to be fraudulent. This should be sufficient encouragement for Directors to ensure that arrangements are in place for the timely payment of superannuation guarantee obligations.