The government recently released a raft of reforms cracking down on illegal phoenixing activity for consultation, including making directors personally liable for GST debts of the companies they manage.
Pitcher Partners executive director of tax consulting, Craig Whatman, told Accountants Daily that the measure could help somewhat in the government’s efforts to combat illegal phoenix activity.
“Often companies that are engaged in phoenix activity are controlled by directors who have instigated that phoenix activity,” Mr Whatman said.
“At the moment, those directors can liquidate a company with unpaid GST debts without being concerned about personal liability for the unpaid GST.
“If the directors know that they could be held personally responsible for the unpaid GST debts of the companies they control, they may well think twice about their actions.”
However, Mr Whatman is concerned about the broad-based nature of GST in comparison to the existing taxes under the Director Penalty Provisions, being PAYG and Superannuation Guarantee obligations.
“GST is a broad-based tax that applies right across business operations and it is therefore more difficult to ensure that a company is correctly accounting for its GST obligations than for its PAYG or Superannuation Guarantee obligations,” Mr Whatman said.
“An extension of the Director Penalty Provisions to include GST would be very onerous for directors because it would significantly increase the burden on them to be across the company’s GST reporting and accounting processes.”
If the proposal makes it through consultation and is implemented, Mr Whatman is hoping that protective measures will be put in place for directors who unintentionally don’t comply with the requirements.
“If the proposal does become a reality, we would like to see protections included for directors who are deliberately misled by company management about the company’s GST position and its obligations to the ATO,” he said.