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New Tax Law Amendments
The Tax Laws Amendment (2012 Measures No 2) Act 2012 received Royal assent on 29 June 2012. The amendments bring significant changes to the previous regime for enforcement of PAYG tax debts.
These amendments come into play as part of the national corporation law reform, placing stricter obligations on directors in a bid to tackle fraudulent phoenix activities by companies. The changes are designed to protect employee entitlements and expand ATO’s enforcement options against insolvent companies with a view to bringing directors to task for these activities.
From 29 June 2012 the ATO may issue penalty notices with respect to superannuation guarantee amounts as well as PAYG withholding. The new regime gives power to the ATO to issue notices directly to a company’s tax agent, closing the gap on so called “safe harbour” defence, whereby a director could potentially escape liability for omission of a tax agent to comply with relevant time frames.
Directors may no longer be able to avoid personal liability by placing the company into administration or liquidation, in circumstances where 3 months have lapsed after the due date for payment by the company and the relevant amounts remain unpaid and unreported. This change applies retrospectively to any PAYG or superannuation guarantee liabilities that arose prior to 29 June 2012 and remain unreported.
The new amendments also place restrictions on director’s (and director’s associates’) abilities to recover tax return credits for unpaid PAYG amounts. A PAYG non-compliance tax may be imposed in these circumstances.
For new directors there is an extension of due diligence period from 14 to 30 days. In the event a penalty notice becomes due or is issued during the new director’s appointment, a director may escape liability by resignation within that 30 day period.
Despite the amendments the best strategy remains to maintain timely reporting and pay those liabilities when they fall due.
If you have received a penalty notice contact our litigation team to discuss your options further.Paul Rojas