ATO Warns Directors on Unpaid Super

In June last year, the government announced significant changes to the Director Penalty Regime.

At that time, the ATO’s powers were expanded to enable pursuit of PAYG and Superannuation Guarantee debts from directors personally in circumstances where such debts remained unpaid and unreported for more than three months past the due date for lodgement.

Until now, we have seen the ATO send warning letters for unpaid PAYG only. But from now on it will be issuing warning letters in respect of Superannuation Guarantee debts.

Most directors understand they may avoid personal liability for a company PAYG tax debt by ensuring their BAS returns are lodged within three months of the due date (whether or not the debt can be paid). However, they are generally unaware that if a company cannot meet its superannuation obligations then it is required to submit Superannuation Guarantee Charge Statementand if this occurs more than three months late, the directors can be held personally liable for the unpaid superannuation sum.

So what if you receive a Super Warning letter?

In general, we would suggest:

  • If there is a debt – Pay it! If the company is able, pay the debt in order to avoid personal liability (there are traps here so feel free to call to discuss with us.)
  • If the company is unable to pay, it must always lodge its BAS and Superannuation Guarantee Charge Statements within three months of the correct lodgment/payment date. By doing so, a director will receive the 21-day grace period to avoid personal liability for a company tax debt if ever a Director Penalty Notice is received (so long as it is acted upon within 21 days of the date on the notice).
  • If a company fails to lodge BAS and Superannuation Guarantee Charge Statements within three months of the due date, a director who receives a Director Penalty Notice cannot avoid personal liability for a company tax debt by placing their company into liquidation.
  • If returns are currently outstanding for more than three months and the company is unable to pay, call Thomson Hall to discuss.