On 29 June 2012 the government passed legislation to amend the director penalty regime to make company directors personally liable for unpaid superannuation contributions. While the changes are important for making the payment of employee superannuation and PAYG a primary consideration, the changes impose more onerous personal obligations on directors. Directors of companies experiencing a cash flow crisis need to be aware of the changes and take steps to mitigate their potential personal liability.

In certain circumstances, directors can be made personally liable for unpaid superannuation and PAYG, including:

  • Appointment of a voluntary administrator or liquidator will not discharge the personal liability if the debts remain unpaid and unreported for 3 months;
  • A new “PAYG Withholding Non-Compliance Tax” has been introduced. Where a director of a company fails to forward to the ATO its PAYG amounts yet claims PAYG withholding credits in their individual tax return, the ATO can levy the PAYG Withholding Non-Compliance Tax at the time of the director’s tax assessment for an amount equal to the PAYG amount the company should have paid.

To avoid or minimise personal liability, directors of companies which cannot pay their superannuation and PAYG debts on time should obtain advice from their accountant without delay.