As part of the program to combat illegal phoenixing, the A New Tax System (Goods and Services Tax) Act 1999 (“GST Act”) and the Tax Administration Act 1953 (“TA Act”) have recently been amended.

The changes have been legislated through the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (“the Amendments”).

Summary of key changes

As a result of the Amendments, the Commissioner of Taxation is able to:

  • collect estimates of anticipated GST, luxury car tax (“LCT”) and wine equalisation tax (“WET”) liabilities even if they have not been assessed;
  • recover director penalties from company directors to collect outstanding GST, LCT and WET liabilities, and estimates of those liabilities; and
  • retain a refund due to a taxpayer that has other outstanding tax lodgements or information that needs to be provided to the Commissioner.

When do the changes apply from?

The changes to the GST Act and TA Act apply from the first day of the quarter following Royal Assent, which is 1 April 2020.

The key changes in more detail

Estimates of anticipated GST, LCT and WET liabilities

Specifically, the Amendments provide the Commissioner with the ability to estimate unpaid amounts of GST, LCT and WET, with the aim of recovering those amounts from taxpayers even if they have not been assessed. Unpaid amounts will be estimated by the Commissioner in circumstances where the Commissioner has made multiple attempts to contact the taxpayer to determine the overdue and unpaid amount and the taxpayer failed to engage or refused to cooperate with determining the overdue and unpaid amount.

The Commissioner will also be able to make an estimate of an unpaid amount where there is an insolvency administration and the Commissioner needs to lodge a proof of debt but only part of the amount owed to the Commissioner has been able to be determined.

Director personal liability for GST, LCT and WET liabilities

As a result of the Amendments, directors will also be personally liable for their company’s GST, LCT and WET liabilities in certain circumstances of non-payment by the company. These changes essentially extend the Commissioner’s powers which previously used to only apply to the superannuation guarantee and PAYG withholding.

Circumstances when directors can be made personally liable include, for example, if there is an indication of phoenix behaviour, assets being dissipated or actions being taken to defeat creditors.

Tax refund retention

The Commissioner will now be able to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount of a refund until the return is lodged or the additional information provided. However, it should be noted that even if the return is lodged or additional information is provided, the Commissioner may still be able to retain the refund under other provisions in the TA Act.

What do I need to do?

Taxpayers need to ensure they are complying with their GST, LCT and WET obligations in order to avoid circumstances when the Commissioner may estimate an indirect tax liability and require this to be paid, make directors personally liable for estimated or assessed indirect tax liabilities of companies they are directors of, or retain any tax refund due.