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Changes to Director Penalty Notice legislation back on the agenda

Nov 13, 2011 | Written by Cliff Sanderson

You may remember the government proposed changes to the Director Penalty Notice legislation in last years budget. The first draft was put forward in June 2011 but was widely condemned by directors and liquidators alike for being too wide reaching. That draft was scheduled to go before parliament in November 2011 but it was withdrawn for further industry consultation.

The Treasury department have just made the results of the consultation public with the issue of a new Exposure Draft detailing the proposed legislation in its current form.

They summarise the changes as follows:

  • expanding the director penalty regime to superannuation guarantee amounts;
  • ensuring that directors cannot have their director penalties remitted by placing their company into administration or liquidation when unpaid Pay As You Go (PAYG) withholding or Superannuation Guarantee (SG) amounts remain unpaid three months after the due date; and
  • restricting access to PAYG withholding credits for company directors and their associates where the company has failed to pay withheld amounts to the Commissioner of Taxation.

The previously proposed legislation  required PAYG and SG to be unpaid and unreported for three months, in other words as long as the company accurately reported their debt the directors would not be held automatically personally liable. This is no longer the case under this new proposal, even if all reporting is up to date directors will still be held automatically personally liable for any PAYG or SG debt more than three months overdue.

Another point of interest is they have shied away from saying this proposed legislation is targeting phoenix company activity. The previous draft was framed as the government’s answer to stem the rising tide of phoenix company activity, a claim that received much criticism as the measures affected all companies.

Public submissions are about to close (2nd of May 2012) so we expect the legislation to go before parliament before the end of this year. We’ll update you as soon as we hear more.

Cliff Sanderson

Cliff Sanderson