ATO crack down on unpaid super
It seems that the Tax Commissioner has lived up to his promise to ramp up debt enforcement efforts as a dramatic increase in enforcement activity has certainly been evident.
What do these changes mean for you?
The changes in enforcement efforts through earlier intervention and lowering the levels at which legal action was commenced, have seen the number of winding up applications between May and September 2015 soar (750 applications in September alone). The majority of the increase is attributable to the ATO.
However, this has not been the only enforcement tool at the ATO’s disposal, as they have also increasingly turned to tax garnishee orders and director penalty notices as an alternative means of enforcement. It seems that more recently the ATO has been focusing on unpaid employee superannuation contributions. This comes as no surprise as the ATO has indicated that between 11-20% of employers could be non-compliant with their superannuation guarantee obligations.
Since 2012, company directors have been held personally liable for breaching their superannuation guarantee obligations. The ATO has the ability to estimate the amount of outstanding superannuation guarantee charges (SGC) and recover this amount in the same way as a tax obligation. Despite this legislation being in operation for over 3 years it seems that many directors are still unaware of this obligation.
Under the director penalty regime, a director will become personally liable on the ‘due date’, which in the case of SGC is the due date for the lodgement of the Superannuation Guarantee Statement. Typically, a Superannuation Guarantee Statement will be due a month after the quarterly payment due dates for payment of superannuation guarantee amounts to the employees’ funds.
The ATO is unable to recover unpaid SGC from a director without issuing a director penalty notice (DPN) first. If the Superannuation Guarantee Statement has been overdue for 3 months or more, the ATO is able to issue a lockdown DPN which does not allow any option for the director other than to pay the underlying superannuation obligation.
Therefore, it is important that directors take a proactive approach when it comes to superannuation obligations. In the event you do receive a formal notice from the ATO (e.g. statutory demand, a DPN, notice of intervention to serve tax garnishee etc.), you should seek immediate professional advice.
If you need any further information in regards to director’s liabilities, please do not hesitate to contact our team of lawyers and accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.