The Tax Laws Amendment (Transfer of Provisions) Bill 2010 was passed by the Senate on 17 June 2010 without amendment and passed by the Lower House on 13 June 2010. Readers will recall that these amendments are likely to have significant effect on the operation of director penalty notice (DPN) provisions.
Accordingly, the Bill is now awaiting Royal Assent.
In summary, the Bill seeks to rewrite provisions from the ITAA 1936 into the ITAA 1997 and Taxation Administration Act 1953 specifically in relation to collection and recovery of tax; forgiveness of commercial debts; leases of luxury cars; farm management deposits; and general insurance; and also seeks to amend 10 Acts to make consequential amendments.
Of particular relevance to those giving advice to directors of companies are those reforms that are targeted at what is termed by the government “fraudulent phoenix activity” and more specifically the rewriting of provisions to tighten the DPN regime. The initial proposals were discussed in our e-update on 31/03/2010.
A summary of the relevant amendments include:
Director penalty notices
- DPN’s will take effect from the date they are posted, rather than the date they are received by the director(s);
- The period provided by those notices will increase from 14 to 21 days before the Commission will take recovery proceedings against Director(s);
- The company will also have the period of 21 days rather than 14 days to either comply with its tax obligation, appoint a Voluntary Administrator, or wind the company up;
- The provisions have been amended so that entering into an installment arrangement will not remit the director’s obligations under the DPN;
- Amend the provisions to make it more difficult for a director to reply on the defence that the director did not take part in the management of the company as a result of “illness or other good reason”, it is now a requirement that the director show that it would have been unreasonable to expect the director to have taken part in the management of the company at the time.
- Existing security deposit rules have been re-written, and now incorporate provisions for the Commissioner to obtain security deposits from a tax payer for any existing or future tax liability (not only income tax liabilities as they could previously have been requested for);
- Security deposits can be required if the taxpayer only intends carrying on a business for a limited period of time, or in other circumstances where the Commissioner deems it as appropriate;
- Security deposits may be required by way of a bond or deposit (including payment of installments).
A link to the Bill can be found here