The Australian Taxation Office (ATO) now has a greater ability to make company directors accountable for unpaid PAYG withholding and superannuation guarantee obligations of their company.

These changes are intended to discourage directors from being involved in fraudulent phoenix activity. The changes also mean that directors cannot simply avoid their director penalties by placing their company into administration or liquidation if PAYG withholding or super guarantee charge amounts have not been reported within three months of the due date.

The director penalty regime now includes superannuation guarantee payments. Directors of a company can now be penalised where the company does not satisfy its superannuation  guarantee obligations.

An estimate of unpaid superannuation can be used as a basis for determining the superannuation guarantee charge payable, and the estimated amount may then give rise to director penalties. The objective is to protect employee entitlements by providing additional avenues to collect superannuation guarantee payments.

It has also become more difficult for directors to place the company into voluntary administration or wind up to avoid liability for penalties where the company has not been reporting its obligations to the ATO.

This measure is intended to encourage directors to promptly place the company into liquidation or voluntary administration if the company is unable to meet its tax or superannuation obligations.

Under the new rules, the ATO can estimate a company’s superannuation guarantee charge liability using information provided by various other sources including third parties. This may occur in circumstances where the ATO is unable to gain access to an employer’s records. Where an estimate is issued, the director can be liable for a penalty equal to that estimate.

Once a penalty is issued directors have 21 days to pay or arrange payment before the ATO can commence proceedings to recover the assessed amount. Recovery of the penalty from the director can occur in a number ways, including garnisheeing bank accounts, offsetting any refunds against the liability, or by court proceedings.

So if a company has not paid any super guarantee or has not reported its unpaid super guarantee to the ATO for over three months, it should take immediate steps to lodge the company’s superannuation guarantee charge statement for the quarter and pay the super guarantee charge that is due.

If a company is unable to make the required payment, it can enter into a payment arrangement with the ATO. Whilst a payment arrangement is in place, the ATO will not take steps to recover the penalty from the director.

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