So, you’ve become a director: ATO compliance
In recent articles, we have outlined the duties and responsibilities of a director and key considerations for managing assets, debts, and investments.
But as a director, what should you be aware of when managing ATO compliance obligations?
Ensuring compliance with the ATO is a critical aspect of your statutory obligations.
Directors must be familiar with their compliance obligations to the ATO, including the timely submission of tax returns, accurate reporting of income, and compliance with GST, PAYG withholding, and superannuation guarantee contributions.
Ensuring that processes comply with ATO regulations is critical, including the accurate calculation and withholding of PAYG tax, as well as timely payment of superannuation contributions for employees.
Financial transactions must be recorded correctly so that the company’s financial statements reflect its true financial position, and all financial records should be up-to-date and readily accessible.
Tax laws and regulations are subject to change, directors should stay informed about any changes that may affect their business. Engaging tax professionals can help with complex tax issues, provide guidance on best practices, and assist with tax planning to optimise the company’s tax position.
The implications of non-compliance
Not only can non-compliance lead to penalties and interest, but directors may also become personally liable for outstanding tax obligations under the ATO director penalty regime, especially when the company has employees.
A Director Penalty Notice (“DPN”) can come in two forms, commonly referred to as:
Non-lockdown DPN, where a company has made lodgements within 3 months of the due date and debts remained unpaid – directors have 21 days to remit the unpaid amounts or take corrective actions such as appoint an administrator, appoint a small business restructuring practitioner, or appoint a liquidator.
Lockdown DPN, where the Company has failed to lodge within 3 months of the due date, the only remedy available to avoid personal liability under a DPN is the payment of the debt in full.
Our tip
Even if you cannot pay the debt in full, continue to report on time and engage with the ATO to negotiate a payment plan.
To avoid receiving a DPN, directors should ensure that their company’s tax obligations are reported and paid on time. If a DPN is received, it is crucial to act promptly to address the outstanding liabilities and seek professional advice if necessary.
By focusing on these aspects of ATO compliance, directors can ensure their business operates within legal frameworks, avoids penalties, and maintains a good standing with the ATO.
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