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COVID-19 and Corporate Insolvency: New tax legislation directors need to know

By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.

In the light of the COVID-19 outbreak, the Federal Government has acted to ameliorate some risks to directors. This includes recently introduced risks to directors.  Directors should be aware of new amendments to the Taxation Administration Act 1953 (Cth) (“the TAA”). The amendments include:

  1. New rules about post-dating ASIC notification of a director resignation;
  2. An estimates regime for GST payments;
  3. Application of the Director Penalty Notice (“DPN”) regime to account for the estimates regime for GST payments; and
  4. Retention of tax refunds for failing to comply with obligations.

Director Resignations

These new rules provide that any notification of a director resignation lodged with ASIC 28 days after the resignation date will only be effective from date of notification. This means that even if a director resigned several years ago, he or she will remain a director (with all of the liabilities associated with such appointment) until their resignation is lodged with ASIC. Therefore, directors who resign should ensure that they lodge a Form 370 with ASIC as soon as possible. If they fail to notify ASIC within 28 days, they may find themselves liable in respect of any non-compliance by the remaining directors.
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New – Proposed Changes to Single Touch Payroll including Jail Terms

The Federal Government has recently proposed legislation which formalises new payroll reporting obligations and which imposes greater penalties on employers and other individuals who refuse to remit PAYG withholding tax and superannuation contributions.

By way of recap:

  • in 2016 legislation was passed introducing Single Touch Payroll (STP) reporting
  • STP reporting requires employers to report to the ATO payments such as salaries and wages, PAYG withholding and super information at the same time that wages are paid to employees
  • the legislation requires that all employers with 20 or more employees comply with STP reporting obligations from 1 July 2018
  • for initial purposes, the calculation of the number of employees is to be undertaken on 1 April 2018

However, recent legislation proposed by the Federal Government would require all businesses to comply with STP obligations from 1 July 2019.

The proposed legislation also:

  • grants the Australian Taxation Office (ATO) a suite of enforcement tools, including a strengthened regime of director penalty notices for unpaid superannuation and other tax-related liabilities
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