After a number of years in the coming, the Federal Government’s Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was enacted last year, and commenced on 1 April 2020.
One of the most significant measures under the new legislation, at least in so far as we see it impacting directors day to day, is the extension of the Director Penalty Notice (DPN) regime to include a company’s GST obligations.
At its simplest, under the expanded regime directors can now find themselves personally liable for a company’s GST liability. This is in addition to the pre-existing categories of taxes, namely PAYG Withholding and Superannuation (as well as a number of other taxes: e.g. luxury car tax).
This is a further erosion of one of the most fundamental principles of corporate law, dating all the way back to the late 1800’s, namely that a company and its officers are separate and distinct legal entities and the liabilities of one do not attach to the other.
As many will already be aware, a DPN can take 1 of 2 forms: a non-lockdown DPN and a lockdown DPN.
In short, lockdown DPNs are issued to directors of companies that have failed to meet their reporting obligations within 3 months of their due date. As the name (tries to) suggest, a lockdown DPN imposes an immediate liability upon the recipient director.
This is in comparison to the non-lockdown DPN which affords the recipient director a number of options to avoid personal liability: however one must move swiftly in order to avail of that “amnesty”.
While the regime change was enacted and commenced over 12 months ago, given a principal part of the Commonwealth’s response to the Covid pandemic has been to forebear from recovery action against delinquent tax-payers (corporate or individual) to date the GST DPNs have not been a common feature of the ATO’s arsenal. That will, however, change: and we expect that change will come in the not so distant future.
If you receive a DPN then it is terribly important that you act immediately and contact the team at Rose Litigation Lawyers for an obligation free, 45-minute consultation. Our team has significant experience in dealing with taxation disputes and litigation and we can advise you through each step of the process.