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Directors liable for company’s PAYG withholding

A recent case before the Administrative Appeals Tribunal (AAT) involved a company that had withheld nearly $850,000 in pay as you go (PAYG) withholding that it had deducted from its employees’ salaries and wages.

It was obviously in some financial trouble, and failed to remit any of the monies to the ATO before being wound up.

Company directors have a legal responsibility to ensure that their company meets its PAYG withholding and superannuation guarantee (SG) obligations. This doesn’t only apply to companies that are wound up, as a director of any company that fails to meet a PAYG withholding or SG liability by the due date can become personally liable for a penalty equal to the unpaid amount.

The ATO issued director penalty notices (DPNs) to the director (the DPN is the first step in the process for the ATO to start legal proceedings to recover the unpaid PAYG). The director tried to fight the case, but the DPNs were valid in the opinion of the AAT.

Want to know more? We’re here to answer your questions – contact us on (03) 8888 4000 or info@thepractice.com.au.