Directors warned over new laws that will bring forward liability for unpaid tax and super

Tax and treasury officials have said new laws that will make directors liable for unpaid tax and superannuation immediately, rather than with 21 days notice, will stop companies from being able to enter liquidation in order to escape liability.

Insolvency expert Cliff Sanderson, who runs the liquidation firm Dissolve, says the laws will mark a massive shift in the industry.

“I would say about four out of five tax returns I see would be more than three months late,” he says, warning business owners to do their tax or risk facing the consequences once the bill becomes law.

“Our message to them is that even if you cannot pay your tax, you still have to do your tax returns. Very commonly, we’ll find that when we get a liquidation, the company won’t have done its BAS, and for a significant amount of time.”

The laws, which were announced earlier this year and are now being debated in Parliament, would make directors personally liable for debts outstanding more than three months.

But in a key change, the Government would no longer have to give directors 21 days’ notice, removing the possibility of businesses being tipped off, and then liquidating their businesses extremely quickly.

“We collectively believe that will be a fairly power disincentive,” ATO phoenix risk manager Grant Darmanin told Parliament yesterday, referring to the removal of the 21 days’ notice.

“Under current arrangements the phoenix operator can continue to trade and wait for the notice to be issued, and then wait for the 21 days to wind up the company, leaving a trail of debt,” Treasury official Haydn Daw.

“The issue of the notice effectively tips them off and they meet the professionals who provide that service,” he said, referring to liquidation.

Sanderson says businesses now need to be spending a lot more time going over their tax, even if they are in financial trouble and feel they won’t have the capacity to pay.

“Sometimes directors never register in the first place. People don’t lodge their tax returns on time. You need to pay attention to this stuff.”

“You just need to be thinking a lot more about your returns, and it’s for the greater good. Unlike any other creditor, the ATO doesn’t know how much it is owed. And then that becomes your problem later on if you don’t do your returns.”

The laws are also designed to help crack down on phoenix activity, an area the ATO has been targeting with more intensity over the past couple of years.

At the committee meeting inquiry yesterday, the Construction, Forestry, Mining and Energy Union claimed activity in its industries occurs more than what is usual, and said there could be $1 billion in unpaid super.

Source: Patrick Stafford smart company website 28th October 2011


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