On March 28, 2018, the Treasury Laws Amendment (2018 Measures No. 4) Bill 2018 was introduced into Parliament to ‘amend and improve the integrity of the superannuation system and improve pay as you go (PAYG) withholding compliance’.
Since receiving Royal Assent on March 1, 2019, certain parts of the Act came into effect on April 1. This includes an amendment to the reporting timeframes for super, affecting whether a Director Penalty Notice (DPN) is either lockdown or non-lockdown.
To ensure you’re up to speed and can advise directors accordingly, here’s a rundown of the DPN PAYG withholding and SGC obligations prior to April 1, plus a summary of the change.
Directors’ obligations PRIOR to April 1
Prior to April 1, directors of a company could be held personally liable for PAYG withholding and SGC amounts payable by a company.
Failure to report within the specified timeframes can change the type of DPN the ATO can issue to a director. What type of DPN is issued depends on the specific obligations directors have failed to meet as follows:
- Non-lockdown is a DPN issued to a director who has lodged a return within three months but the PAYG and SGC amounts remain unpaid.
- Lockdown is a DPN issued to a director who has failed to lodge a return within three months of the due date and failed to pay the PAYG and SGC amounts.
Under a non-lockdown DPN, directors have the option to escape personal liability if the company:
- pays it debt;
- appoints a voluntary administrator; or
- places the company into liquidation or voluntary creditors liquidation within 21 days of receiving the DPN.
These options are not available under a lockdown DPN and the amount becomes a debt due by both the company and its directors personally.
Directors’ obligations POST April 1
Under the new amended law, the three month from due date rule for superannuation reporting no longer applies.
Instead, the SGC amounts must be reported by their due date i.e. within 28 days of the end of each quarter instead of the former three months from due date if the director is to have any chance of avoiding the penalty.
Importantly, the PAYG withholding three month from due date rule continues to apply.
It’s very common for a company in financial trouble not to pay or report unpaid super.
However, as part of its recent crackdown, the ATO has increased its audit activity of unpaid and unreported employee super and is issuing more lockdown DPNs. Because of this, it’s more important than ever that obligations are met.
If you have a client struggling to meet their PAYG or super obligations, contact us today for timely, independent advice.