Bankruptcy and Insolvency Law – Director Penalty Notices

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On 29th June 2012, the government amended the Tax Laws to crack down on phoenix operators.

Previously Company Directors could avoid personal liability if:

  1. The company’s liability was discharged; or
  2. The company is placed into administration; or
  3. The Company is wound up and a liquidator is appointed;

within 21 days from the date of the issue of a Director Penalty Notice.

The major change provides a much tighter time frame for Directors to avoid personal liability for outstanding superannuation and PAYG tax. If the liability for PAYG and Superannuation remains unreported and unpaid for more than three months from its due date, the placing of the Company into Administration or appointing a Liquidator to wind up the company will not remove the personal liability of the Directors, despite the fact that they may take those steps within 21 days of receiving a Directors Penalty Notice.

Directors need to ensure that they maintain their lodgements within the three month lodgement period, and seriously consider appointing an external administrator if the Company will not be able to meet these liabilities by the due date.

It is also imperative that Directors ensure the ASIC records are up to date, particularly current addresses of Company Officers, as the non-receipt of a Director’s Penalty Notice will not avoid personal liability for the Director and the Director Penalty Notice will be deemed to have been received.

Should you need to discuss this issue, or any other corporate management concern, please contact us and we would be happy to assist.