On 4 July 2019 the Federal Government introduced the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 into the House of Representatives.

The Bill seeks to implements measures to combat phoenixing. Three impact GST:

  • extending the power of the Commissioner to make estimates of tax to include an entity’s “net amount” under the GST Act;
  • expanding the ATO’s power to retain refunds where there are outstanding tax lodgements; and significantly
  • extending the Director Penalty Regime (DPR) to GST (and luxury car tax and wine equalisation tax) – making directors personally liable for the company’s unpaid tax.

Estimates of Tax

The current regime enables the Commissioner to estimate an entity’s PAYG liability and superannuation guarantee charge and recover the estimated amount. A taxpayer becomes liable when the Commissioner serves a notice.

The Bill proposes to empower the Commissioner to make estimates of an entity’s anticipated “net amount” under the GST Act. The new measures will deem the estimated net amount to be payable.  The estimated net amount will be deemed payable on the day the entity was required to lodge its BAS.

Retention of refunds

The Commissioner is authorised to retain refunds where the taxpayer has failed to lodge a BAS or where the Commissioner is verifying information provided.

The Bill proposes to extend the circumstances in which the Commissioner may retain refunds to include where the taxpayer has failed to lodge a return (such as an income tax return) or provide other information that may affect the refund amount.

Director Penalty Notices

The director penalty regime makes directors of a company personally liable for specified taxation liabilities of the company in certain circumstances of non-payment. The regime includes PAYG withholding, superannuation guarantee charges and estimates of those amounts.

The Bill proposes to extend the regime and further pierce the corporate veil to include unsatisfied liabilities to pay net amounts and GST instalments, including estimates of those amounts.

A theme of the new measures is compliance with statutory reporting and increased exposure for non-compliance. It’s of critical importance to a director that the entity report its obligations by due dates even if it’s unable to discharge its liability. A director is also required to ensure that reporting occurs as required and not assume it’s taking place.

All amendments will apply to the first tax period after the date of Royal Assent.

Practitioners need to be aware that the above changes will present additional challenges and risks to them when dealing with clients in financial trouble.