Legislation to allow the ATO to estimate GST liabilities and make director’s personally liable for GST has progressed this week, after having been introduced during the previous parliament and lapsing due to the election.
Among a raft of other measures designed to combat phoenixing activity and make resigning directors more accountable, the GST Measures have now passed the House of Representatives and will make their way to the Senate. With only one sitting week of parliament left for the year, the senate will have to act fast for the measures to be introduced and effective from 1 January 2020. Failing that, the Senate will not resume until February, where debate will continue.
There are two significant components relating to GST within the bill:
The bill intends to expand the ATO’s powers to estimate liabilities, which is currently primarily utilised for PAYG Withholding and unpaid Superannuation, to also be able to estimate GST, Wine equalisation tax and Luxury car tax. The ATO has a draft Practical Compliance Guide which outlines how they intend to apply the estimate law, should it be passed. The ATO says it will only make an estimate they have reasonable grounds that phoenix behaviour is occurring or is being prepared.
Further, such an estimate requires internal approvals and should follow other attempts to contact and cooperate with the company prior to issuing estimates. Nevertheless, the objection period for such estimates is short. Estimates are due and payable in the same way as regular GST obligations, which is critical in the face of the Director Personal Liability changes.
Directors Personal Liability
Alongside the expansion of the ability to estimate, the bill also provides for an expansion to the ATO’s enforcement capabilities for GST to more closely match PAYG Withholding and Superannuation systems.
Currently, where a company fails to meet its obligations relating to PAYG Withholding or Super, the directors of the company become personally liable for those obligations and will be pursued in cases of non-payment. On passage of the new law the same rules will apply where a company fails to meet GST, Wine Equalisation tax, or Luxury car tax obligations.
Directors must therefore take renewed interest to the appropriate management of the BAS reporting and payment of their companies, alongside ensuring that ATO correspondence is managed promptly and appropriately. As previously stated, a GST Estimate is an obligation to the same extent as any lodgement, and so ignoring a GST Estimates notice may result in directors becoming personally liable for significant company debts.
This bill is yet another mark of increasing accountability and responsibilities for Directors over the companies which they oversea. Directors of companies of all sizes should ensure they have strong GST compliance and monitoring in place to protect themselves from these increasing obligations.
For further information, please contact Noé Vicca at firstname.lastname@example.org.
Date of Issue: 3 December 2019 Author: Hayden Gaffel
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