As you may be aware directors can become personally liable for the debts of a company if that company has been trading while insolvent. Insolvent means that the company cannot pay its debts as and when they become due.
Some of the regular debts owing are:
Equipment finance loans,
Property or investment loans,
Pay As You Go Withholding,
Goods and Services Tax Payable,
The Australian Taxation Office currently administers a Director Penalty Regime. This regime gives the Australian Taxation Office the ability to issue penalties to directors of failed companies. The main penalty notices which are currently issued relate to unpaid Pay As You Go Withholding and unpaid Superannuation.
During the recent budget announcements it was proposed that this regime would be extended to also provide the Australian Taxation Office the ability to issue penalty notices for:
Goods and Services Tax,
Luxury Car Tax and
Wine Equalisation Tax.
This means that if a notice is issued the directors may become personally liable for these debts of the company.
While there is no date of effect yet confirmed we recommend that all directors review the financial position of the companies they are involved with to identify the extent of their personal exposure to any of these current amounts and also any amounts outlined under the changes to the regime.
If you are unsure about undertaking this review then we are able to assist by reviewing the financial information for the relevant companies and providing a report which outlines your position as well as recommended actions for your consideration.
Also, we recommend that directors review the twelve month cashflow forecasts for each company to identify if there are any potential problems on the horizon which need to be addressed at the board level.
If you are a director of a company which doesn't have a twelve month cashflow forecast then we are able to assist with preparing such a report so that the board of directors have a clearer picture of what issues may need to be discussed and resolved.