With the Tax Laws Amendment (2012 Measures No 2) Bill 2012 and Pay As You Go Withholding Non-compliance Tax Bill 2012 receiving Royal Assent on 29 June 2012, the legislative changes which make directors personally liable for their company's unpaid superannuation guarantee amounts have come into force.

At the meeting of the Active Compliance Working Group held on 26 July 2012, various aspects of the changes were discussed including the ATO's powers and director defences. Broadly, the ATO said the changes expand the Director Penalty Notice (DPN) regime and state that a director can incur a penalty equal to the company's SGC liability even where the liability is not reported.

The ATO said the liability to unpaid super guarantee amounts is a parallel liability for the company and the director themselves, which will allow it to garnishee the director's personal bank accounts were appropriate. However, the ATO said the recovery of the penalty can only occur 21 days after the issue of the DPN.

The legislative changes also contain "lockdown provisions" which seek to address the issue of directors knowing that the company failed to pay liabilities and not taking appropriate action, the ATO said. Usually in those circumstances, it said the directors would place the company into voluntary administration/liquidation to avoid personal liability once the DPN issues.

According to the ATO, the lockdown provisions remove directors' right of remission from three months after the penalty is incurred unless the company liability is reported to the ATO within three months of when it should have been reported. It said the failure to report will mean that the liability cannot be removed unless the debt is paid.
As part of the changes, the ATO said the DPN may be issued to the directors' residential addresses or to the address of their registered tax agent. Further, it said even though the legislative changes are not retrospective, they impact on any penalties already incurred.

The ATO noted that the traditional defences for directors still apply and include:

• the director did not manage the company due to illness etc;
• the director took all reasonable steps to get the company to pay the liability (however, there is no excuse if the company does not have the money to pay the liability); and
• the director formed a reasonable belief that the employees were merely contractors.

The ATO said directors can ask the Commissioner to consider their defence even where there are no legal proceedings on foot.