Avoiding personal liability
Don’t have enough cash to pay PAYG tax or superannuation on time? You should still lodge Business Activity Statement (BAS) or Superannuation Guarantee Charge (SGC) forms on time to avoid immediate and automatic personal liability for those debts.
Most businesses will experience a cash flow shortage at some stage in their life. If it does happen, the directors should be mindful of their potential personal exposure and take steps to minimise and hopefully avoid personal liability for company debts.
The simple step of lodging forms on time with the ATO will avoid immediate personal liability which will occur automatically if the BAS or SCG returns are more than three months overdue. Lodging the forms, even if you can’t pay on time, will avoid the automatic personal liability and give directors some time to correct the position before personal liability can be imposed by further notices. If however, three months passes without payment or lodgement of the forms, the directors’ personal liability becomes automatic and “locked down”. This enables the ATO to pursue the company and the directors personally for the debt which can then only be extinguished by payment.
Most businesses have procedures in place to prepare and lodge a BAS within their reporting cycle, whether that is monthly or quarterly. However, we have discovered that many business operators and advisers are not aware of the obligation to lodge SGC Statements with ATO if superannuation is not lodged with the employees’ nominated superannuation funds on time. The table below is a reminder of the due dates.
||Superannuation due for payment into fund
||SGC Statement to to ATO- if superannuation not paid on time
The form for a Superannuation Guarantee Charge Statement can be obtained from the ATO’s website, or contact us if you have trouble finding it.
If a company finds itself with some cashflow issues, it is imperative that it still lodges BAS and SCG Statements by the due date to avoid automatic personal liability of the directors for those debts.
If you are facing a similar situation, talk to the Business Recovery & Insolvency specialists at PKF to help resolve your cash flow crisis and minimise the personal liability of the directors. Call Sydney on (02) 8346 6000 or Newcastle on (02) 4962 2688, or click the button below.