Before you become a director

GST

 

Before you become a director in a company

 

If you are about to become a director of a company, check for any unpaid or unreported PAYG withholding, goods and services tax (GST) or Superannuation Guarantee Charge (SGC) liabilities.

 

If you become a director and the company has outstanding PAYG withholding, net GST or SGC obligations, you will become personally liable for a penalty equal to these amounts (these are called director penalties).

 

As a new director, you have 30 days, starting on the day of your appointment, before you become liable to director penalties equal to:

 

  • all the company’s unpaid PAYG withholding liabilities
  • all unpaid net GST liabilities (inclusive of Luxury Car Tax (LCT) and Wine Equalisation Tax (WET) from 1 April 2020.
  • all unpaid SGC liabilities from 1 April 2012.

 

However, as a new director, you will not be liable to director penalties for amounts due before your appointment if, within 30 days starting on the date of your appointment, the company does one of the following:

 

  • pays their PAYG withholding, net GST and/or SGC debt in full
  • appoints an administrator under section 436A, 436B or 436C of the Corporations Act 2001
  • begins to be wound up (within the meaning of the Corporations Act 2001).

 

Even if you become a new director and you resign within the 30 day period, you will still be liable for the unpaid PAYG withholding, net GST and/or SGC liabilities of the company that were due before your appointment.

 

For PAYG withholding and net GST, you will also be liable for any unpaid liabilities for reporting periods that started while you were a director, except if you resigned before the first withholding event in that period.

 

For SGC, you will also be liable for any unpaid liabilities for reporting periods that started while you were a director, except if you resigned before the date the charge became payable.

 

Example

 

John and Mary are directors of XYZ Pty Ltd (the company). During the January to March quarter of the 2019–20 income year, the company withheld tax from employees’ wages but failed to pay the amounts withheld. When the company did not pay by the due date of 28 April 2020, John and Mary both became personally liable for a penalty amount equal to the unpaid amounts.

 

On 2 June 2020, Mark became a director of the company. To avoid incurring a director penalty, Mark had 30 days from the date of his appointment to cause the company to pay the amount, appoint a voluntary administrator or have the company put into liquidation.

 

Expert Tax is registered ASIC Agent and can assist with maintaining ASIC register, making changes to ASIC register and registration of new companies.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further assistance on tax related matters.