We are a firm dedicated to helping companies, businesses and individuals through financially difficult times.

In a number of different ways, company directors can incur a personal liability related to a tax liability owed by their company. Divisions 8 and 9 of Part VI of the Income Tax Assessment Act 1936 (ITAA 1936) provide that directors can incur penalties equal to their company's unpaid remittance provision liabilities, unpaid estimates of those liabilities or the unpaid instalments of a defaulted payment agreement under section 222ALA of that Act.

 

Directors are also under a duty (per section 588G of the Corporations Act 2001) to prevent the company incurring debts while it is insolvent. Where they fail in that duty, directors can be ordered to compensate creditors for the debts that were accrued while the company was trading insolvently and which were not able to be recovered through the liquidation.

 

Furthermore, section 588FGA of the Corporations Act 2001 provides that if a company's payment in respect of a remittance provision liability is held to be a voidable transaction, directors are liable to indemnify the Commissioner in respect of any loss or damage resulting from an order requiring the Commissioner to return that payment to the liquidated company.

 

Where the company commits an offence (such as failing to comply with its obligations to furnish a return or other information) the directors may also be liable to prosecution under section 8Y of the Taxation Administration Act 1953. Where the offence has resulted in a loss to the Commonwealth, a person convicted of an offence could be ordered to make reparation under section 21B of the Crimes Act 1914.

 

What do I do if I receive a Director Penalty Notice?

If you receive a Director Penalty Notice from the ATO, you will note it provides four (4) choices and allows 14 days only to achieve compliance. You must do one of the things listed below. - Pay the Debt in Full, - Enter an Instalment Arrangement to pay the debt, - Place the Company into Voluntary Administration, - Place the Company into Liquidation, - Do none of the above.

 

Panic!  I know at the top of the page I said don't, but I know the seriousiness of one and I would panic if I received one. This does not sound particularly good but it is much better than doing nothing because it is better to do something while you have options then to want to do something when you have NO options.