Pursuant to the Taxation Administration Act 1953 (Cth)(“TAA”) Company Directors are now obliged to ensure that a company either meets its remittance obligations under subdivision 16-B of Schedule 1 of the TAA or alternatively, the company is promptly placed into voluntary administration or liquidation. 

These amendments have been introduced to prevent the all too frequent instances in the past of Directors liquidating companies to “escape” liability for tax debts with the company then subsequently re-emerging as a new entity (sometimes called a “phoenix” company) with the same or similar Directors but under a different name.  One of the means by which the TAA seeks to prevent Directors engaging in this activity is to prohibit the company being placed into administration or liquidation where there are outstanding PAYG or superannuation guarantee withholding payments which are at least three months old and which are unreported and unpaid. 

Failure on the part of the company to either pay monies due to the ATO or to appoint an administrator or commence a winding up of the company results in each Director being personal liability not only for the unpaid monies, but also for penalties which can be imposed pursuant to the TAA. 

The range of payments to which these provisions apply includes:

  • PAYG tax withheld on behalf of employees;
  • Superannuation guaranteed payments. 
  • Various other withholding payments as specified in Schedule 1. 

Some limited protection is provided for Directors who resign prior to the relevant period or who are appointed after the relevant period however these protections are limited in time.  Care needs to be taken by any Director of a company or any person contemplating becoming a Director of a company to ensure that a company’s remittance obligations are up to date and likely to remain that way. 

There are limited defences available where Directors take all reasonable steps necessary for the company to comply with its obligations however reliance on an ability to raise a defence will be extremely difficult given the natural reluctance of the Courts to allow Directors to escape their responsibilities. 

Directors or those contemplating such a role should be aware of these important provisions and the significant impact they can have on them.