Changes to Director Penalty Notices

Since April 2019 there has been an important change to the Director Penalty Notice (DPN) regime in relation to a Director’s personal liability for an unpaid Superannuation Guarantee (SG) debt. 

A Director will now be personally liable if a company’s SG liabilities are not remitted within 28 days of the end of each quarter.  Previously a Director had 3 months to report their superannuation and settle the debt without the risk that the ATO would issue a lockdown DPN. 

A Director who fails to lodge SG returns within the 28 day time period will cause the ATO to issue a lockdown DPN, which makes the Director automatically liable for those specific debts and prevents them from escaping liability via a liquidation/administration. 

Directors should note that these changes do not alter the 3 month period allowed for the settlement of a company’s PAYG debt.

Cove Legal are experts in assisting clients with contentious tax matters and insolvency proceedings.  We provide advice on ATO payment plans, director penalty notices, winders and all other aspects of ATO debt recovery action.  Practice Director Roger Blow has acted extensively on behalf of the ATO in Perth and has specific expertise in tax related disputes. 

Roger Blow P: +61 8 6381 0326 or e: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

New Director ID laws proposed

It is being proposed that all existing and future directors of registered corporations be required to apply for a permanent identification number which will keep track of their various directorships.   

The Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 proposes amendments to the Corporations Act 2001 making it compulsory for all newly appointed directors to apply for a unique Director Identification Number (DIN) within 28 days of becoming a director.  For existing directors, it is proposed that there will be transitional provisions giving a currently appointed director 15 months to apply for a DIN once the new requirement commences.  Those considering becoming a director within 12 months could also apply for a DIN.

With the current system, directors are only required to lodge their details with ASIC but there is no process in place to verify their identity. The new requirements will improve the traceability of a director’s relationship across all companies and allow the regulators to quickly investigate a director’s involvement in what may be repeated unlawful activity, in particular illegal phoenixing.

There will be civil and criminal penalties introduced for directors who do not have a DIN or that fail to apply for a DIN within the applicable timeframe.  A director also commits an offence if they knowingly apply for multiple DIN’s or misrepresent a DIN to a registered body or government agency.

Whilst the draft legislation was introduced to Parliament in February, experts recommend that companies prepare for its enactment.  We will keep you updated on its progress. 

Cove Legal provides legal advice on a wide range of commercial issues. We specialise in dispute work, but Principal Roger Blow’s 20+ years working in some of the largest commercial law firms allows us to address a wide range of client legal needs with fee structures that are tailored to the commercial issues being addressed.  Give us a no-obligation call to see if we can help.

 Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au

This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

Tax Litigation Update

At Cove Legal we are very active in the tax litigation space and two recent decisions particularly caught our eye.

Firstly in Arbuckle v Commissioner of Taxation [2019] WASC 7 Martin J dismissed Mr Arbuckle’s Appeal against the sentence imposed by the Magistrate’s Court.

The Court found that Mr Arbuckle’s long-standing failure to meet his tax obligations did warrant a 6- month suspended prison term. He was released on the undertaking to be of good behaviour for a period of two years.   

In handing down the sentence, Magistrate Huston said he needed to “send a message very clearly to Mr Arbuckle that he needs to be discouraged from engaging in this form of unlawful behaviour ever again.” 

“I also need to send a message to the broader community that the expectations in the legislation for lodging income tax returns and business activity statements is not something to fit in when life is convenient. They have to be prioritised because it’s a legislative requirement to do those things.” 

The second decision is Deputy Commissioner of Taxation v Nore [2019] WADC 27 which saw the District Court dismiss an ATO summary judgment application against Mr Nore on the basis that there was sufficient uncertainties in the ATO’s case (despite the ATO claiming Mr Nore had no defence to the claim) to justify the matters being aired in court. 

Mr Nore had been issued with a Director Penalty Notice with respect to a company that failed to remit superannuation guarantee charges.  There are a number of steps a Director can take in order to avoid personal liability in that scenario. Some of those actions were undertaken by Mr Nore with the Court observing “In the circumstances … I am struggling to see what the defendant could have done.”

The two decisions perhaps sit at opposite ends of the true litigation scale: the Supreme Court showing a willingness to endorse custodial sentences for more serious personal tax omissions whilst the District Court is resisting the Commissioner’s attempts to rely upon his procedural/legislative advantages so as to prevent arguable defences from being properly considered by the Courts.  Both show that tax disputes can very much turn on their own particular facts and circumstances and require specialist guidance.

Roger Blow

P: +61 8 6381 0326 or e: roger@covelegal.com.au

 This publication is not intended to provide and does not provide legal advice. You should seek professional legal advice relating to your specific situation(s) before taking any action based upon its contents.

 

WA Company goes into Administration

 

This week saw another significant WA company, RCR Tomlinson, placed into the hands of Administrators.  https://www.perthnow.com.au/business/contracting/engineering-firm-rcr-tomlinson-collapses-appoints-administrators-ng-b881028755z

According to recent ASIC figures 2,182 companies across Australia entered into external administration between July to September 2018, a 4.5% increase on the same period in 2017.

The statistics also identify that roughly one third of companies are found to have traded insolvent for over 2 years prior to the appointment of an external administrator.  Of most concern is the current rate of 92% of liquidations resulting in nil dividends for unsecured creditors and less than 1% achieving more than 50c in the dollar.

Those statistics need to be considered against the backdrop of more aggressive collection strategies from the ATO, with an increase in the use of garnishee notices, Director Penalty Notices and seeking security over personal director assets before entering into payment plans for company tax debts.

Cove Legal provide specialist advice to clients facing possible insolvency outcomes or facing actual or threatened ATO debt action.  If you are attempting to address director personal liability issues, director penalty notices, garnishee orders, winding up applications, statutory demands or need advice on an insolvency situation generally, speak to us today as we would love to try and help. 

#garnishee #DPN #directorliability