ATO taking “stronger action” against directors personally for company liabilities

By Paul Apathy and Leah Allen

The ATO is using the director penalty regime at an unprecedented rate to make directors personally liable for the full value of the company’s unremitted PAYG, net GST and superannuation guarantee charge (SGC) amounts.

• The ATO has committed to a “firmer action” policy for dealing with taxpayers who have overdue PAYG, GST and SGC payments owing and don’t engage with the ATO.

• The director penalty regime enables the ATO to pursue directors personally for the full amount of unpaid PAYG, GST and SGC payments, and is severe – liability cannot be avoided by resigning as director nor, in some cases, by placing the company into external administration (so called “lockdown” director penalty notices).

• Director penalty notices (DPNs) are being issued at an unprecedented rate. The ATO endeavours to issue a DPN as soon as practicable once the relevant amount becomes overdue.

• The director penalty regime is one of a number of tools that the ATO is using to pursue corporate tax debts – in August 2024 nearly 40% of winding up applications were brought by the ATO or a State Revenue Office.

• All company directors should ensure they report PAYG, GST and SGC amounts owed to the ATO promptly to avoid the most severe aspects of the director penalty regime if the company becomes unable to meet those payments when they are due.  

• Where a company’s PAYG, GST and SCG amounts are overdue, the director should engage with the ATO early to seek a payment plan, though legal advice should be sought on broader implications for the director and the company.

Want to know more? Contact our key contacts below.