The Safety Net for Your Assets

by Michael Garrone Published

Did you pay your employees superannuation on time for the 31 December 2015 quarter? – if you weren’t sure this was 28 January 2016. There are no extensions to this date or ability for the Australian Taxation Office to allow extensions.

If in any case you’ve missed paying the most recent quarters of recent times you should read on:

If you have paid your employee’s superannuation fund after this date, then it can only count as a contribution for the 31 March 2016 quarter. You have to instead pay the super to the Australian Taxation Office (ATO) on a superannuation guarantee statement. The Australian Taxation Office (ATO) will then pay these amounts on to your employee’s fund. This amount will not be deductible to your business.

The worst part is that since 1 July 2012, the law was changed so that PAYG withholding and employer superannuation liabilities that were both not reported and paid within three months can become a personal liability of a director.

These rules have been around before 2012 but did not include superannuation and were certainly not as harsh. In the past, you had three primary ways of dealing with an ATO notice informing the directors of personal liability for PAYG withholding:

1. The Director could pay the liability out in full

2. The Director can enter a payment arrangement

3. The Director can place the company into administration within fourteen days

What is often misunderstood is that since July 2012, the third option is no longer made available for businesses with liabilities that the ATO do not know about within three months nor those who have not paid out in full. 

While we often talk about the benefits of corporate limited liability, there are certain things you cannot be protected from. We have heard anecdotally of instances of the ATO re-instating companies that have long since been wound up. After re-instatement, directors have received notices of personal liability for PAYG withholding.

Are you one of the businesses who may have missed the recent quarterly superannuation deadline? As the first example states, not paying on time means have an ongoing risk as a director of being personally liable for this amount years into the future. You cannot remove this risk without lodging and paying the relevant superannuation guarantee statements. 

If you are one of these businesses, here are proactive ways in dealing with situations like this:

  • Don’t pay the December quarter superannuation to your staff fund – this won’t extinguish your personal liability.
  • Prepare, lodge and pay the superannuation guarantee statements to the ATO for the December quarter.
  • Pay the superannuation monthly rather than quarterly – this is a good business process that ensures you are more likely to pay all superannuation on time. It will also mean that you are only at risk of one month at the most being overdue but are also more likely to have streamlined processes.
  • Incorporate more disciplined cash flow and budgeting processes.
  • Find out as a director and owner what your finance function is doing - are they paying and lodging critical documents on time or are they leaving you with a permanent liability.

More than ever the GFC has meant that more and more personal liability attaches to directors of companies. The good thing is that there are preemptive measures you can do to reduce this exposure.

Asset protection can be tricky at times, so don’t be shy, get in touch with me and ask any questions via email on m.garrone@businessdepot.com.au, or give me or Josh Smith a call on 07 3193 3000

Michael Garrone
read more by Michael Garrone

Michael is our Tax Specialist Director as well as the head of our business advisory niches of Building and Construction and Property.

With Michael's extensive experience and a real interest in these niche areas he is able to provide practical business and tax advice that is unique to the Building and Construction and Property industries. His tailored advice helps guide these businesses through start-up phase to succession and sale. Michael has many years’ experience in solving complex problems involving corporate tax, restructures, international taxation, Capital Gains Tax and GST. 

Michael also has a strong background in self-managed superannuation and is an authorised representative of superannuationDEPOT. In this area Michael provides strategic advice on SMSF structures and in particular limited recourse borrowing arrangements. Through this diverse experience Michael has developed expertise within a wide range of industries including building and construction, property, professional services (legal, engineering & finance), technology and software and manufacturing.

Michael Garrone is an authorised representative [No. 1240832] of Hunter Green Pty Ltd AFSL 225962

[ Never miss a Tool, Tip, Resource or Event ]

Join the businessDEPOT community and get the latest advice
and insight directly to your inbox.

Tax

Get All Zen With Your Tax

Get In Touch

insights

[ We help businesses and individuals of all shapes and sizes, and provide insight based on our extensive experience. ]

[ About ]

[ businessDEPOT is driven by a team of plain-talking, energetic and proactive people, and we believe in a fresh approach to providing advice and accounting services. ]