A recent court case highlights how important it is to make sure that Directors lodge and pay PAYG and SGC amounts. In more positive news, the deadline for gaining financial assistance through the EMDG grant is looming, which should encourage entities that engage in export-related business to consider if they are eligible. However, the financial assistance for employers seeking to hire new employees under the NSW Jobs Action Plan has become harder to access, but there are still opportunities for small businesses to receive a rebate for every new job they create.
Directors held personally liable for withheld PAYG and SGC payments
Are you a director of a company, or are you about to become one? If so, it is important to understand the potential implications of any unpaid and unreported Pay As You Go (PAYG) withholding or Superannuation Guarantee Charge (SGC) amounts due from and including 30 June 2012 – especially relating to longstanding debts.
If you fail to meet a PAYG withholding or SGC liability in full by the due date, you may be personally liable for a penalty equal to the unpaid amount under the Director Penalty Regime. While the ATO contacts you to give you an opportunity to pay these liabilities even when you first miss the due date, once a Director Penalty Notice (DPN) is issued your options are severely reduced.
A recent Director Penalty Notice Case
DCT v Fitzgerald [2016] NSWSC 971 14 July 2016
- From 1 August 2013 to 31 August 2014, the Company withheld $1,965,485 for the purposes of the PAYG withholding provisions. However, these amounts were not remitted to the Commissioner
- On 20 March 2015, the Commissioner sent a Director Penalty Regime notice to the address of the Taxpayer, which appeared in the records of ASIC.
- The Company was wound up on 9 September 2015.
- The Taxpayer claimed he did not receive the penalty notice and so was not given the opportunity to have the penalty remitted by placing the Company under administration within 21 days of being given the notice.
- The Supreme Court of New South Wales argued that although the Taxpayer actually received the notice on or around 7 May 2015, he was deemed to have received it on 20 March 2015. This delay did not affect his right to achieve remittance. The payments could no longer be remitted since the Company was not placed under administration in due time.
- So the Court held that Taxpayer had no defence to the Commissioner’s claim and must pay the sum of $1,965,485 plus costs.
Your options to respond to a DPN
As you can see, though the Taxpayer was given sufficient time to remit the payments, no action was taken and a DPN was sent. When the Taxpayer did not respond to the DPN in 21 days, he was made personally liable for $1,965,485. His defence that he did not receive the notice was not accepted.
So it is vital to explore the following options within 21 days of receiving a DPN:
| For unpaid amounts that were reported within 3 months of the due date | For unpaid amounts that were not reported within 3 months of the due date |
|---|---|
| Payment of the debt | Payment of the debt |
| Appointment of An Administrator | |
| Appointment of a Liquidator to wind-up the company |
As shown above the options are very limited when PAYG or SGC lodgements have not been made on time. For example, if you lodged 3 months late at any given time in the past, you cannot liquidate your company to pay your debts once you receive a DPN – you simply have to find a way for the company to pay the debt. This could mean that you have to provide the company with funds out of your own assets.
Thus it is even more important to avoid a DPN altogether. You can only do this by lodging and paying your PAYG and SGC amounts on time or, if in difficulty, proactively organising a suitable payment arrangement with the ATO.
If you are a new director, you can become liable for payments which were due prior to your appointment. If you resign, you remain liable up to the date of your resignation – and beyond, if the first withholding event in the reporting period occurred before you resigned.
If you have outstanding debt with ATO or cash flow difficulties or have any questions regarding your PAYG and SGC, contact your Calibre advisor.
Application Deadline Looms for Receiving Financial Assistance under the EMDG
The Export Market Development Grant (EMDG) encourages SMEs to export products and services which are manufactured, provided, or developed in Australia. The financial assistance focuses on exports markets in tourism service and intellectual property
If you incur $15,000 or more in eligible export promotion expenses, EMDG consultants can help you access the scheme which can reimburse 50% of your expenses.
What are the Benefits?
- Minimum reimbursement of $5,000
- Maximum reimbursement of $150,000
- Maximum of 8 grants
- 2,757 grants were given to SMEs in 2012-13
- $120.4m in grants was paid in 2012-13
- $3.1 billion in exports were generated by EMDG recipients
- On average, $42,950 was paid per grant
Are you eligible?
- You must be the principal of your entity
- Entities can be Australian-based businesses, individuals, partnerships, companies, statutory corporations, co-op’s and trusts
- Your entity must have carried on an export business in Australia during the grant year
- Your annual income should not be more than $50m
- You must have spent at least $15,000 on eligible export promotion activities over the last financial year
- Your entity must have exported or promoted eligible goods, services, or intellectual property, or promoted events in Australia.
- Promoted goods must be made in Australia, or if made outside Australia must provide significant financial benefit to Australia when sold overseas.
- You can have no disqualifying convictions
- If you are a first time applicant, you must satisfy additional Grants Entry Requirements to show you have the finances and logistics to properly carry out export activities
There are specific criteria in regards to the kinds of expenses you can claim and the corresponding amounts you can claim.
This grant could provide much needed financial support to your export activities. If you think you are eligible, then the deadline for applying is 30 November 2016. To see if you are eligible, and to understand the documentation requirements and submit on time, contact your advisor at Calibre.
Access to the NSW Jobs Action Plan to be restricted to small businesses
The NSW Government introduced the Jobs Action Plan to encourage businesses to create jobs within the state. Originally, you could be eligible for a payroll tax rebate of up to $5000 per each new job under the initiative.
The rebate amount per job has increased to $6,000. New jobs commencing on or after 31 July 2016 will receive a rebate of $2,000 and $4,000 payable on the first anniversary and second anniversary respectively.
Jobs can be considered for the rebate scheme if they meet all of the following conditions:
- A person is employed on a full-time, part-time, or casual basis in a position that is a new job.
- The employment commences on or after 1 July 2011.
- To be eligible for the full rebate the employment must be maintained for a period of at least 2 years
- The services of the employee are performed wholly or mainly in NSW.
However, new limits on who can claim significantly restricts access to the scheme.
- New jobs commencing on or after 31 July 2016 will only be eligible for the rebate if the business has 50 or less full-time equivalent (FTE) employees prior to hiring the new job.
- Retrospective claims will not be allowed for registrations made after 23 November 2015.
- From 23 November 2015, late registrations for the Jobs Action Plan will only be accepted, without justification, if made within 90 days of the commencement of the new job.
- Exceptions to these limits will only be accepted under extraordinary circumstances. Reasons including resourcing restrictions and being unaware of the scheme will not be accepted by the OSR.
Effectively, the Jobs Action Plan now only assists small and medium businesses in obtaining a payroll tax rebate for those entities that are registered for and paying payroll tax. To see if you can still apply for the rebate under the new restrictions, contact your Calibre advisor.
Important Disclaimer: Readers should not act solely on the basis of the material on this page. Items herein are general comments only and do not constitute or convey advice. Legislation and proposals of legislation are also subject to constant change. We therefore recommend that formal advice be sought before acting in any of the areas. This news article is issued as a guide to the readers. Calibre Business Advisory Pty Ltd and its associated entities disclaims any losses that may be incurred as a result of the reader undertaking any action based on this article.