Personal Liability of Directors

If you are a director of a company, you need to be aware that the ATO is issuing Director Penalty Notices directly to the home of company directors. Failure to comply with the notice will cause the director to be personally liable for a penalty equal to his or her company's unpaid remittance amount.

The ATO has the ability to make directors personally liable for un-remitted tax deductions.

A Director Penalty Notice sets out the details of the unpaid amount and four possible courses of action which can be taken within 14 days. Director liability can only be avoided through selection of one of these four options:

1. Pay the amount identified in the notice;
2. Enter into a written agreement with the ATO for the payment of the outstanding amount;
3. Cause the company to be wound up;
4. Cause the company to enter into administration

Checklist

• Persons who are about to be appointed as a director of a company, or are newly appointed directors, should undertake a thorough review of the company's financial status, including its position in respect of tax liability, in order to determine whether they might become personally liable for any outstanding amounts.
• Current directors should at all times be aware of a company's taxation status and make regular enquiries in relation to this.
• Directors should obtain professional advice promptly upon receipt of a Directors Penalty Notice.
• Unlike many notices issued by the ATO, Director Penalty Notices cannot be negotiated or dealt with informally by contacting the ATO.
• If one or all of the directors do not cause one of the four events to occur referred to in the Notice within 14 days of service, each director will be personally liable for the amount shown in the Director Penalty Notice.

The ATO will not forgive or waive this liability.

If you have any concerns in this regard, please contact Alexanders on (02) 9438 3233.