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The New Director Penalty Notices – Changes to Div 269

The Tax Laws Amendment (2012 Measures No. 2) Act 2012 (‘Measures Act’) and the Pay As You Go Withholding Non-compliance Tax Act 2012 (‘PAYG Act’) came into force on 29 June 2012.

Unpaid superannuation guarantee charge

Directors can now personally be liable in circumstances where their company has an unpaid superannuation guarantee charge (SGC).

The amendments treat an unpaid SGC as payable even if the SGC has not been assessed. This avoids difficulties arising from company directors not lodging superannuation guarantee statements and therefore delaying being issued penalties for unpaid amounts.

The Commissioner may make estimates of unpaid SGC (and also unpaid PAYG which has always been the case) and recover that amount under Div 268 of Sch 1 to the TAA 1953. This estimated amount is treated as being payable on the due date, even if the SGC has not been assessed. This avoids the delay of waiting for the assessment to be issued.


A defence is available where a company has applied the Superannuation Guarantee (Administration) Act 1992 (Cth) in a way that was reasonably arguable, and took reasonable care in applying that Act to the circumstances. This addresses situations where a company reasonably thought a worker was a contractor, not an employee and therefore had concluded (incorrectly) that superannuation was thus not payable (s 269-30 TAA 1953).

Remission of penalties

Directors are now prevented from having their penalties remitted by placing their company into administration or liquidation when the company’s PAYGW or superannuation obligations remain unpaid and unreported three months after their due date. This is so even if a company enters into administration or liquidation before a notice of the penalty is served or within 21 days of that notice.

Where liability is for PAYGW amounts actually withheld, then the penalty is not remitted to the extent that the company has not notified the Commissioner of those amounts before the due date.

Where a company under-reports a superannuation guarantee charge statement then the penalty is not remitted to the extent that the company has under-reported before the due date.

Defences generally

Now, the defences under s 269-35 TAA 1953 are:

  • A director is not liable if because of illness or some other good reason, it would have been unreasonable to expect them to take part, and they did not take part in the management of the company. [This introduces an objective element which was missing in the earlier defence].
  • Also, there is no liability if a director took all reasonable steps to ensure payment of the obligations, or if the company entered into administration or liquidation, or otherwise where there were no reasonable steps that director could have taken to ensure those things happened.

These defences are also applicable to PAYGW non-compliance tax (as to which see below). And, the defences as regards PAYG non-compliance tax, PAYGW & SGC must be raised with the Commissioner within 60 days of receiving notice of a penalty if you wish to prevent the Commissioner from acting on a garnishee notice under s 260-5.

PAYGW non-compliance tax

This will be levied on directors or their associates and it is to the effect that the PAYGW credits are effectively withheld until the company complies with its PAYGW obligations. Credits will only be made available when a company subsequently pays the amounts withheld (s 18 -165 TAA 1953). There is no incentive to delay paying the withheld amounts as interest payments on credits for later compliance are not payable.

An associate may be liable to PAYGW non compliance tax in two different circumstances:

  • Where they had actual knowledge of a company’s failure to pay, or were reckless as to that knowledge (based on their relationship with a director or the company), and they did not either take reasonable steps to influence the director to comply or otherwise report the non-compliance to the Commissioner.
  • Where that associate was an employee of the company, and the Commissioner is satisfied that they were treated more favourably than other employees of the company.

PAYGW non-compliance tax will not apply where a director is liable to pay a penalty under Div 269. That is, the Commissioner is not entitled to recover twice.

The amendments contain a right of indemnity and contribution in respect of directors’ liability to PAYGW non-compliance tax, which recognises that directors must share responsibility for the company’s conduct, even if they receive different amounts of PAYGW credits due to differing salaries.