Tuesday, July 17th, 2012
Recent changes to tax law will have an immediate and significant impact on the level of personal liability company directors face if their business fails.

Essentially, these changes extend the ways in which the ATO can seize company director’s personal assets to cover unpaid PAYG and Superannuation debts.
These changes carry potential implications for entrepreneurship in Australia, and there may be a flow through effect on the economy. The changes were passed into law on 29th June 2012.

Why is this important?

Corporate law in Australia has traditionally supported entrepreneurship and commercial risk taking, which are seen to be fundamental to wealth creation and a well-functioning market.

These changes will make starting and running a business, particularly a small or medium business, less attractive. Any reduction in business investment or activity is bound to have a follow through effect on every aspect of the economy, including unemployment and GDP growth.

With the Australian economy being traditionally strong in the SMB sector, the effect of these law changes could be significant.

What has changed?

Previously a director could be held personally liable for unpaid PAYG taxes. Under the new laws this remains, but liability is extended, exit strategies are removed, and stricter time limits are put into effect. The changes include:
• A director's liability will be extended to superannuation
• Placing a company into administration or liquidation will not, in some circumstances, protect a director's personal assets
• Associates, including spouses, can be held liable.
• Many changes are retrospective.

A full run down can be found here:

Economic Impact

These changes mean:
• People will be less likely to take a risk investing or starting a business.
• Business failure rates may increase, and
• Personal bankruptcy rates may soar as a result
• Less growth in the jobs market.

The timing of these changes must be questioned at a time when there is already so much financial uncertainty in running a business outside of the mining sector in this country.

What should business owners do?

Anyone who is a director of a company needs to make themselves aware of these new laws immediately. The retrospective nature of these changes means these laws will start impacting businesses from their next tax lodgment dates. There is no time to wait.

The Insolvency Experts have prepared a detailed coverage of the law changes on their website. It includes a rundown of the historical context for these changes and a full copy of the explanatory memorandum put out by the Treasury department.

Business owners are strongly advised to take 10 minutes to read and understand this, then speak about it with their accountant or financial advisor.

Further Questions
Steven Kugel, Director of the Insolvency Experts, is available to answer questions and give advice regarding these law changes. To contact call Steven on 1300 767 525.

Contact Profile

Insolvency Experts

The Insolvency Experts offer advice an solutions to Australians in cases of corporate and personal insolvency.
Steven Kugel
P: 1300 767 525
W: www.insolvencyexperts.com.au


Tax law, business ownership, entrepreneurship, corporate law



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