As a result, it has been proposed that where a company does not report their outstanding liabilities which fall under the current DPN regime within three months of falling due, the grace period of 21 days with which directors are currently afforded to act on an issued DPN will be abolished. In effect this makes the director personally liable in respect of unpaid company liabilities falling within the DPN regime, without the need of a DPN being issued. Companies that report their liabilities in the ordinary course will be subject to the current regime requiring a DPN to be issued before personal liability may be enforced. This provides the director with the opportunity to avoid personal liability by taking the requisite action.
The budget further extends the DPN regime to not only include withholding taxes not remitted to the ATO (such as PAYG), but also to include superannuation guarantee amounts not remitted to the employees’ funds within the prescribed period. The rationale behind such change is that the withholding amount caught by the current DPN regime are effectively held on trust by a company for the Commissioner, and should therefore at no stage be included in a company’s cash flow. With regard to superannuation guarantee amounts, such payments are required to be made by an employer for the benefit of their employees. In effect, such payments are held on trust by the employer for the employee and should also therefore not be included in a company’s cash flow.
It must also be noted that in certain circumstances, directors and associates of directors will be prevented from obtaining personal tax credits for withheld amounts where the company has failed to pay those withheld amounts to the Commissioner.
In effect this will allow the ATO to deny PAYG credits to directors (and their families) of companies which have not remitted, rather than not withheld PAYG amounts.
