Directors to be personally liable for unpaid GST from 1 April 2020
The Australian Senate passed The Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 on 5 February 2020. While this bill does not come into action until the start of the first quarter after Royal Assent is received, this is expected to be 1 April 2020. It is important for directors that they are familiar with the provision tucked into the bill regarding personal liability for GST debt.
Directors of a company face a personal liability if the GST debt is 3 months overdue and comes as an addition to the personal liability faced for non-payment of PAYGW and Superannuation.
The purpose of this provision is to control the amount of unpaid taxes when a company is liquidated, as often GST makes up the largest portion of this.
In order to avoid personal liability for unpaid GST, directors will need to ensure prior to 1 April 2020 they have done one of the following:
- Have the company pay the debt; or
- Have the company enter into a repayment arrangement with the ATO to repay the debt in full; or
- Consider the appointment of a liquidator or administrator to the company.
Clients who have unpaid GST liabilities, are at immediate risk of personal liability.
Doing nothing will have significant consequences as come 1 April for GST debts which are three months past their lodgement date, directors will be automatically liable for the unpaid GST.
Early intervention may eliminate personal liability for a company’s director and provide for a greater chance of rehabilitation.
