Director Penalties for Unpaid Super – Changes To The Law

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Company Directors can be held personally liable for a company’s unpaid employee superannuation.

The unpaid superannuation is (after three months) payable to the ATO as a Superannuation Guarantee Charge (SGC) and the ATO can issue a Director Penalty Notice for unpaid SGC. When a Director receives a Director Penalty Notice, it means that the Director’s personal assets can be sold to pay for the debts listed in the penalty notice. This is not a good outcome for a Director of a company.

If a company fails to pay superannuation, but it lodges its SGC Statements by the SGC Statement due dates, the ATO can issue a Director Penalty Notice to the company’s directors. The Directors can become liable to the ATO for the amount of SGC claimed in the Director Penalty Notice. Directors can avoid personal liability if the SGC is paid by the company.

If a company fails to pay superannuation and it also fails to lodge SGC statements by the SGC Statement due dates, the Directors are automatically personally liable for unpaid superannuation. In these circumstances:

  • The ATO can estimate unpaid superannuation if it chooses
  • The ATO can and will issue a Director Penalty Notice to recover superannuation from the Directors
  • Placing the company in liquidation or voluntary administration will not avoid liability for the Directors
  • The ATO can and will issue Director Penalty Notice after a company is already in liquidation or voluntary administration

In May 2019, new legislation was passed to change the date upon which company directors become automatically liable for SGC amounts. The new date is the date which SGC Statements are due, which are:

Quarter Period Super Due for Payment SGC Statement Due Date
1 1 July – 30 September 28 October 28 November
2 1 October – 31 December 28 February 28 February
3 1 January – 31 March 28 April 28 May
4 1 April – 30 June 28 July 28 Aug

If your company cannot pay superannuation, the best thing to do to avoid liability is to lodge SGC Statements within three months of them being due. If this is done, then you will be able to avoid liability under any Director Penalty Notice issued by placing your company in liquidation, if this is the best option available. The ATO will also not be able to issue you with a Director Penalty Notice after your company has been placed in liquidation.

But if your company is unable to pay superannuation within three months of it being due, then it probably has some underlying financial problems and you should see advice regarding the company’s circumstances, strategies which may be put in place and risks to you as a Director personally.

This document contains general advice only and is prepared without taking into account your particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should speak to a licensed financial advisor who should assess its relevance to your individual circumstances.  While The Field Group believes the information is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the corporations Act 2001.

About the author

The Field Group is composed of experts in the fields of Xero accounting, personal tax, self-managed superannuation, audit services, business services, bookkeeping, bench marking, business structuring and ATO Compliance. Based in Melbourne, The Field Group are also able to work with clients all over Australia and are the market leader for accounting services in the Ringwood, Croydon, Chirnside Park, Lilydale and general Melbourne eastern suburb region.

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