Director penalty remission rules
The director penalty regime targets directors of companies that fail to meet their PAYG withholding obligations, including directors of fraudulent phoenix companies who often fail to meet their tax and superannuation obligations.
The director penalty regime seeks to ensure that directors cause their company to meet certain tax obligations. The director penalty regime also seeks to ensure that if a company is unable to fund its tax obligations, the director promptly puts the company into liquidation or voluntary administration.
In order to recover a director penalty from a director, the Commissioner must issue a director penalty notice and wait until the end of 21 days after issuing that notice before commencing proceedings.
With one exception, a director penalty is remitted if, before a director penalty notice has been issued, or within 21 days after the issue of a director penalty notice, any of the following things happen:
- the company pays the liability
- an administrator of the company is appointed
- the company begins to be wound up.
The exception is that, from 30 June 2012, a director penalty will not be remitted if the underlying liability remains unpaid and unreported three months after the due date unless the company pays its liability. That is, in those circumstances, the directors will not be able to avoid liability for a director penalty by placing the company into administration or winding up. |
