From 1 April 2020, the ATO will be able to issue Director Penalty Notices for a company’s unpaid GST.
This article summarises how GST Director Penalty Notices will apply.
Two types of GST Director Penalty Notices
GST Director Penalty Notices will operate in the same way as those for PAYG Tax. This means that there will be two types of Director Penalty Notices:
- 21-Day Director Penalty Notices will be able to be issued if a company lodges activity statements within three months of them being due, but fails to pay GST. In these circumstances a director will be liable for GST 21 days after the date that the Director Penalty Notice was issued. However, liability can be avoided by liquidating a company or placing it in voluntary administration; and
- Lockdown Director Penalty Notices can be issued if a company fails to pay GST and fails to lodge activity statements within three months of them being due. If this happens a Director Penalty Notice can be issued which will impose automatic liability on the company’s directors. And appointing a Liquidator or Voluntary Administrator will not avoid liability.
Estimates of unpaid GST
The ATO can also estimate GST liabilities and issue Director Penalty Notices based on estimates. These types of Director Penalty Notices will most likely be Lockdown Director Penalty Notices, as the GST will not have been reported to the ATO within three months.
Are GST Director Penalty Notice provisions retrospective?
The provisions are not retrospective. Therefore, GST Director Penalty Notices can only be issued for GST debts incurred after 1 April 2020.
How can you avoid liability?
There are certain defences available to liabilities under GST Director Penalty Notices. However, they are difficult and costly to raise and use as a defence to a claim by the ATO.
The best things you can do are:
- Make sure activity statements are lodged within three months of being due. This avoids the risk of Lockdown Director Penalty Notices; and
- Ensure you obtain professional advice at an early stage if your company is not paying tax or at the latest immediately when a Director Penalty Notice is received.
You should also make sure your residential address is up to date with ASIC as Director Penalty Notices will be sent there and not to the company’s registered office.
Contact us for assistance
If you have a tax debt, you need to urgently get professional advice to avoid the risk of ATO recovery action, including the risk of a Director Penalty Notice. Get in touch with us for a free, no obligation consultation on 1300 906 966 or send us an email at email@example.com