Legislation relating to GST Director Penalty Notices was passed on 5 February 2020 and now awaits Royal Assent. The legislation changes are not retrospective and only apply for unpaid GST incurred from the beginning of the 4th quarter of this income year (i.e. from 1 April 2020).

What was the situation prior to the law change?

Previously Director Penalty Notices could only be issued for a Company’s unpaid PAYG Withholding Tax and Superannuation obligations. If a company failed to pay its GST obligation the only recourse the ATO could take was to start legal proceedings against the company itself or commence action to liquidate the company. Director’s could not be held personally liable for a Company’s GST debts.

What is the situation now the law has changed?

The ATO will be able to issue Director Penalty Notices for a Company’s unpaid GST from 1 April 2020.

If a company lodges its BAS within three months of the due date and it doesn’t pay its GST, the ATO can issue a Director Penalty Notice to the directors of the company. The only way the directors can not be held personally liable after receiving such a notice is to (a) pay the GST outstanding; (b) place the company into liquidation or voluntary administration – WITHIN 21 days.

If a company doesn’t lodge its BAS within three months of the due date and doesn’t pay its GST, the directors are automatically personally liable for the company’s unpaid GST if the company doesn’t ultimately pay it.

Take home points

If you are a director of a company it is vital that you ensure all BAS’s are lodged on-time before the due date – even if the company doesn’t have the ability to pay the debt straight away.

If your company has an outstanding tax debt that it is unable to pay you should urgently contact our office to discuss the steps you should take as the company director to ensure no personal liability is assessed to you.