As a company director, you can become personally liable for,
your company’s unpaid PAYGW, GST, and Superannuation
Guarantee Charge (SGC).
PAYGW
Withholding may be required for your workers, other businesses and other payees. The most common payments employers withhold amounts from are those concerning employees, directors, companies that do not quote an ABN to you, and contractors who have a voluntary agreement with you to withhold.
TIP – Employees
Withholding obligations will apply to most payments you make to employees (such as salary, wages, and specific allowances) but not contractors. While in most cases it will be clear cut, whether a worker is an employee (as distinct from a contractor) ultimately depends on a range of factors as contained
in the employment agreement or contract. A worker will generally be an employee if, in the contract/agreement, a majority of the following factors are present:
• Control – the business has a legal right to control how, where, and when the worker works.
• Integration – the worker serves in the business. They are contractually required to perform work as a
representative of that business.
• Mode of remuneration – the worker is paid for the time worked, a price per item or activity, or a commission.
• Ability to subcontract or delegate – There is no ability to do this. Instead, the worker must perform the work themselves and cannot pay someone else.
• Provision of tools or equipment – the business provides these, not the worker.
• Risk – the worker bears little or no risk. The business bears the commercial risk for any costs arising from
injury or defect in its work. The other main payment to employees that PAYG may
apply to is allowances. Payments other than income from employment may also
need tax withheld, including:
• investment income to someone who does not provide their TFN.
• dividends, interest and royalties paid to non-residents of Australia.
• payments to certain foreign residents for activities related to gaming, entertainment and sports, and
construction.
• payments to Australian residents working overseas.
• super income streams and annuities
• payments made to beneficiaries of closely held trusts.
Superannuation guarantee charge
If you do not pay a worker’s superannuation guarantee (SG) amount in full, on time and to the correct fund, a business must pay the superannuation guarantee charge (SGC). They must also lodge an SGC statement to the ATO. The SGC is more than the super a business would have otherwise paid to the employee’s fund and is not tax deductible.
The SGC includes:
A) The SG shortfall is made up of the following:
• SG is calculated on ordinary time earnings.
• Any choice liability, based on the shortfall and capped at
$500.
B) nominal interest of 10% per annum (accrues from the start of the relevant quarter)
C) an administration fee of $20 per employee per quarterGST, LCT and WET In February 2020, legislation was passed to extend the DPN regime to indirect taxes
– GST, luxury car tax (LCT),and wine equalisation tax (WET).
The rationale for extending the DPN regime to these taxes was that non-compliant entities who do not meet their obligations could undercut their prices because they do not intend to pay the taxes, giving them a competitive advantage over compliant companies. Taking action to increase the chances that these taxes are collected is necessary to level the business playing field and to build confidence amongst complying businesses and in the tax system more generally. Additionally, illegal phoenix activity risks the integrity of the GST credit system by claiming excess GST credits, resulting in an excessive refund. Once the excess is discovered, the ATO must amend the relevant assessment and pursue the excess as a debt. The collection of such debts can be obstructed by phoenix activity whereby the company is placed into
liquidation, and a new entity is later free of that debt. Hence the new provisions extend the DPN regime to GST, LCT and WET liabilities and =estimates of those. This commenced on 1 April 2020. As stated, taxpayers are only liable to pay any net amount owing to the ATO when the amount is assessed. To this end, GST, LCT, and WET operate on a self-assessment system – a taxpayer is deemed to have received an assessment when it lodges its Activity Statement for a tax period. Additionally, some small businesses and not-for-profits can pay GST in instalments. Where this is the case, the instalment liabilities are subtracted from the entity’s net amount for the tax period. Where no Activity Statement is lodged, no assessment is
received, and the ATO has no precise way of determining a taxpayer’s GST, LCT or WET net amount. The ATO can now estimate an entity’s net amount based on prior periods to address this