Directors Beware! - Personal Liability for Unpaid PAYG & Super
- Arnold Shields
- Sep 14, 2011
- 2 min read
Updated: Jun 11
With an increasing number of businesses entering liquidation or administration, the Federal Treasury has released a draft exposure bill proposing significant amendments to director liability laws. The aim? To prevent directors from hiding behind the “corporate veil” when companies default on key obligations such as PAYG withholding tax and employee superannuation.
These changes, if enacted, will reshape the way directors are held accountable—potentially putting personal assets and income at risk.
What Are the Proposed Changes?
The proposed legislation will:
Make directors personally liable for unpaid PAYG withholding and unpaid superannuation contributions.
Allow the ATO to withhold funds from the director’s own salary or wages to recover unpaid amounts.
Permit the ATO to pursue personal assets of directors—even if the company is in liquidation or administration.
This expands the scope of the Director Penalty Notice (DPN) regime and removes key escape routes previously available under corporate protections.
Late Lodgement = Personal Liability
Perhaps the most critical change is that liability will not be extinguished by late lodgement.
If PAYG or super amounts are not reported within 3 months after their due date, the director becomes automatically personally liable. At that point:
Voluntary administration or liquidation will not protect the director.
Directors cannot appoint an administrator to avoid penalties after the deadline.
This is a serious shift in compliance risk and timing.
What Can Directors Do to Protect Themselves?
To avoid personal liability, directors must ensure:
Business Activity Statements (BAS) and Tax Returns are lodged on time.
Superannuation Guarantee contributions are both reported and paid on time.
Internal systems and advisors provide early warning signs of financial stress or reporting delays.
Proactive compliance, not reactive management, is now a legal necessity.
When Will the Changes Take Effect?
While the legislation is currently in draft exposure stage, it is expected to be passed before the end of 2011. Directors should assume the reforms will become law and act immediately to strengthen reporting and payment processes.
Need Advice or a Compliance Health Check?
At Dolman Bateman, we specialise in helping directors meet their obligations and avoid personal liability under the ATO’s director penalty regime. Whether you need support managing overdue liabilities or developing a risk mitigation strategy, we’re here to help.
📞 Contact us today to review your company’s tax position and reporting compliance.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
