This article has been updated to reflect recent developments with GST Director Penalty Notices.
In July 2019, the Federal Government introduced the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019. The legislation was passed by both house of Parliament on 5 February 2020. It gives the ATO the power to:
- Estimate GST payable by a company,if GST is not reported to the ATO;
- Issue company directors with Director Penalty Notices for unpaid GST; and
- Collect unpaid GST directly from company directors where Director Penalty Notices expire, or they are lockdown Director Penalty Notices.
The provisions will commence operation from 1 April 2020. They will not act retrospectively so directors can only be liable for GST incurred after 1 April 2020.
GST Director Penalty Notices will apply in the same manner as those for PAYG Tax. That is there will be two types of Director Penalty Notices for GST.
21 Day GST Director Penalty Notices
21 Day GST Director Penalty Notices will apply if a company fails to pay GST but it lodges activity statements within three months of due dates. If this happens the ATO can issue Director Penalty Notices to the company’s directors which may make them liable for unpaid GST. However, they can avoid liability if:
- The GST is paid; or
- The company is placed in voluntary administration or liquidation within 21 days of the date of the Director Penalty Notice.
Lockdown GST Director Penalty Notices
Lockdown GST Director Penalty Notices will apply where a company doesn’t pay GST and also doesn’t lodge activity statements within three months of due dates. If this happens:
- The ATO will estimate a company’s GST liability;
- The ATO will issue Director Penalty Notices to the directors;
- Voluntary administration or liquidation will not avoid the directors’ liability for unpaid GST; and
- The ATO can issue Director Penalty Notices for GST after a company is in voluntary administration or liquidation.
The defences which currently apply in relation to Director Penalty Notices also apply for GST Director Penalty Notices. These include the defences that the director was unable to comply with the obligation due to illness or other good reason, or that the director took all reasonable steps to comply with the obligation.
Additionally, a director will also be able to claim a defence to the extent the penalty was due to a company adopting a reasonably arguable position and the company took reasonable care in connection with applying the A New Tax System (Goods and Services Tax) Act 1999.
Contact us for assistance
If you or your business are having difficulties paying your tax debts, the professionals at TAX DEBT SOLVED can help with a free, no-obligation consultation, contact us here.