Changes to Director Penalty Notice Regime – Superannuation Guarantee Liability
15 April 2019
The Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 received Royal Assent on 1 March 2019. The Act includes changes to the current Director Penalty Notice “DPN” regime in respect to a company director’s personal liability for unpaid superannuation. These changes are effective from 1 April 2019.
Prior to the change, directors of a company could be held personally liable for unpaid Superannuation and PAYG withholding if the company debt remained unreported three months after the relevant due date.
If reported within the three month timeframe, personal liability could be avoided if a DPN was issued and the director took either of the following options within the 21 day timeframe detailed in the DPN:-
- Pay the debt;
- Appoint a Voluntary Administrator to the company;
- Appoint a Liquidator to the company.
From 1 April 2019 the three month reporting rule for outstanding Superannuation is no longer available and the liability must now be reported by the superannuation guarantee charge due date (being within 1 month and 28 days of the end of each quarter). Failure to do so will result in personal liability for directors. The PAYG reporting period remains unchanged.
Numerous additional reforms are proposed in the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 which aim to deter and disrupt the core behaviours of illegal phoenix operators. The reforms include extending the DPN regime to capture outstanding company GST liabilities as well as:
- New civil and criminal phoenix offences to target those who engage in and facilitate illegal phoenix transactions;
- Extension of the existing liquidator asset claw back avenues to cover illegal phoenix transactions;
- New ASIC powers to recover property that has been transferred under an illegal phoenix transaction;
- Prevention of directors backdating their resignations to avoid personal liability; and
- Restriction of voting rights of related creditors at meetings regarding the appointment or removal and replacement of a liquidator.
It is crucial for companies experiencing financial difficulty to act early and seek professional advice. For further information regarding the above, please contact me.