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Director’s Liability Notices from the Australian Taxation Office

Written by: Meredith Dorham

Article Overview: The Australian Taxation Office (ATO) is now taking an aggressive position in relation to unpaid company taxes.

Director’s Liability Notices from the Australian Taxation Office

Directors can be made personally liable to pay company tax if the company:

fails to remit deductions as required;

fails to pay an estimate as required; or

contravenes a repayment agreement made with the ATO.

The personal duty on directors to pay the tax can be enforced by the ATO through penalties equal to the unpaid amount of the company’s liability. These notices (issued pursuant to 222AOE and 222APE of the Income Tax Assessment Act) are called Directors’ Liability Notices.

If you receive a Directors’ Liability Notice, you must cause the company to pay the amount within 14 days or:

enter into a repayment agreement with the ATO;

appoint an administrator under the Corporations Act; or

prepare for the company to be wound up.

If payment or arrangements to pay are not made, the directors can be required to personally pay the Company’s tax debt.

It is always relevant to remember that the failure by directors to ensure that the company has the ability to repay debts, may suggest that the company is insolvent. If that is the case, directors may not only be responsible for taxation debts, but could also be responsible for any other debt incurred by the company at a time when the director knew, or ought to have known, that the company was unable to pay its creditors.

It is also important to remember that the above applies to all directors (whether they have control of the company, or have no actual involvement in the day to day affairs). As a director you have a duty to make yourself aware of what is happening in your Company

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Article Tags: ato, corporations, creditors, debts, directors liability, failure, income tax assessment, income tax assessment act, liability notice, personal duty, repayment agreement, tax assessment act, tax debt, taxation



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