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Small business accountants and the ATO are on company directors tailsDiving into running a business enterprise of your very own can be one of the most exciting times in a person's life, with the obvious exceptions of family related events such as marriage and children. Personally, I don't know anybody that gets married without giving it serious thought and due consideration of the lifelong commitment involved. Taking this thought and applying it to your business life, why would you start a business without first ensuring that you are fully informed of your rights and responsibilities. This can be no more important than when starting a proprietary limited company and taking up a company directorship. Company directors have numerous rights and responsibilities and keeping abreast of these is critical. Even the slightest indiscretion can see you fall foul of the Corporations Act, the ASIC and the ATO. Recent changes that came into effect on 29 June 2012 have further extended the intricate web of obligations placed on directors and it is critical that all company directors are made aware of such issues. The main issue the ATO is trying to clamp down is the one of so called "phoenix businesses". This involves the directors winding up a business that has accumulated various debts and in turn having those debts wiped clean as they disappear with the company. They then start up a brand new company with no debts, only to do the same thing again under a different name. These changes assist in making it increasingly difficult to get away with such practices and in turn benefiting the innocent employees who often lose out on their entitlements and the economy as a whole, which suffers from lost revenue. The changes have been implemented in order to widen the ability of the ATO to prevent company directors from abdicating their responsibilities, specifically in relation to director's penalties that can be imposed for not paying monies due to the ATO from PAYG Withholding and superannuation non-compliance. The changes can be summarised into seven key areas.
Whilst the above points can make for heavy reading, what should be relatively straight forward to understand is that the ATO has widened its powers to chase company directors who absolve themselves of their responsibilities, whether deliberately, carelessly or otherwise. Where these issues must be treated with even greater importance is upon entering a company directorship with other individuals. Often, it may well be the case that the other director, or directors, has not fulfilled their end of the bargain. Be assured that all company directors can be held responsible for the unpaid debts of the business. Leaving the day-to-day management of your business to another director does not absolve you from these laws, so the decision to enter business with another person became even more critical from 29 June 2012. If you, as a company director, believe that your company cannot pay amounts due for PAYG Withholding or compulsory superannuation then you must either act to rectify the situation immediately or seek assistance in placing the company into administration or liquidation within three months of the debts original due date. Burying your head in the proverbial sand and waiting until you receive one of those nasty letters from the ATO to act will no longer protect you from the powers at the ATO's disposal. For any advise or questions on the above mentioned it is always a good idea to talk to your small business accountant and here at mas as ipa accountants we stay up to date with current industry information making us a great option for advice. |