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30 Sep 2014

Directors - Are you personally liable for unpaid superannuation?


2 min

By simply lodging the paperwork, you can avoid personal liability.

The amended Directors Penalty Notice (DPN) regime imposes a penalty on directors by way of a personal liability for the unpaid superannuation guarantee charge (SGC) of the company. It is of great concern that many directors are not aware of the DPN regime and particularly their potential personal liability for any unpaid SGC.

A director is personally liable once the superannuation payment is not made by the due date. Should the superannuation guarantee statement become more than three months overdue, the lock-down provision will apply and the director is permanently personally liable for the superannuation liability. If the superannuation guarantee statement is lodged within three months of the due date, the non-lockdown provisions will apply in which case there are still option available to a director to avoid recovery proceedings against them personally. This can include putting the company into liquidation/voluntary administration.

Let’s look at some dates as an example.

Fourth quarter (April to June)

Superannuation on employee wages — due 28 July.

If the company fails to pay — must lodge a SGC statement — 28 August

If the company fails to lodge the SGC statement by 28 November (i.e. three months after 28 August) — company director is personally liable.

The only way a director can avoid liability is to pay the SGC. Placing the company into voluntary administration/liquidation will not remove personal liability.

The amended regime has been effective since 30 June 2012, and while it may be thought that liability doesn’t apply for any superannuation due before 30 June 2012, this is not correct. The Australian Taxation Office's interpretation is that it applies to any superannuation due for payment after 30 June 2012. So, directors are liable for superannuation from the fourth quarter 2012 (1 April 2012 to 30 June 2012) because the deadline for payment is 28 July 2012.

Advisors should review any clients that have superannuation owing to employees, and have not lodged SGC returns, from 1 April 2012. If so, these directors are personally liable for those superannuation amounts.

For more information:

Director Penalty Notices - Worrells Website

Strengthening director obligations - ATO Website

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