Tax Laws Amendment (2012 Measures No. 2) Act 2012 (99 of 2012)

Schedule 1 Companies' non-compliance with PAYG withholding and superannuation guarantee obligations

Part 2 Credits

Taxation Administration Act 1953

14 At the end of Division 18 in Schedule 1

Add:

Subdivision 18-D - Directors etc. of non-complying companies

Table of sections

Object of Subdivision

18-120 Object of Subdivision

PAYG withholding non-compliance tax

18-125 Directors of non-complying companies

18-130 Directors of non-complying companies - tax reduced in certain circumstances

18-135 Associates of directors of non-complying companies

18-140 Notices

18-145 When PAYG withholding non-compliance tax must be paid

18-150 General interest charge payable on unpaid PAYG withholding non-compliance tax

18-155 Validity of decisions and evidence

18-160 Rights of indemnity and contribution

Credits for later compliance

18-165 Credits for later compliance - scope

18-170 Credits for later compliance - Commissioner must give notice in certain circumstances

18-175 Credits for later compliance - Commissioner may give notice

18-180 Effect of earlier credits

Other provisions

18-185 When Commissioner may give notice

18-190 Review of decisions

Object of Subdivision

18-120 Object of Subdivision

The object of this Subdivision is to reverse the economic benefit of a credit under section 18-15 (Tax credit for recipient of withholding payment) of a director, or an *associate of a director, of a company if:

(a) the company does not comply with its obligations under subsection 16-70(1) (obligation to pay amounts withheld to the Commissioner); and

(b) the credit is attributable to *amounts withheld from *withholding payments made by the company to the director or associate;

until the company complies with its obligations.

PAYG withholding non-compliance tax

18-125 Directors of non-complying companies

Liability to pay PAYG withholding non-compliance tax

(1) An individual must pay *PAYG withholding non-compliance tax in relation to a company for an income year of the individual if:

(a) the individual is or has been a director (within the meaning of the Corporations Act 2001) of the company; and

(b) the company was required to pay to the Commissioner under subsection 16-70(1) in this Schedule amounts:

(i) the company withheld from *withholding payments the company made to any entities during the income year of the individual; and

(ii) to which subsection (2) applies; and

(c) the company did not pay the total of those amounts to the Commissioner on or before the last day (the non-compliance day ) on or before which the company was required to pay any of those amounts to the Commissioner in accordance with subsection 16-70(1); and

(d) a credit to which the individual is entitled under section 18-15 is attributable to an extent to *amounts withheld by the company under Division 12 from withholding payments made to the individual during the income year of the individual.

Note: For the purposes of paragraph (1)(d), it does not matter whether the company pays the amounts withheld from the withholding payments made to the individual to the Commissioner under subsection 16-70(1).

(2) This subsection applies to *amounts withheld that the company was required to pay to the Commissioner on or before a particular day (the payment day ) under subsection 16-70(1), if:

(a) both of the following subparagraphs apply:

(i) the individual was a director (within the meaning of the Corporations Act 2001) of the company on the payment day;

(ii) the company did not pay the total of those amounts to the Commissioner in accordance with subsection 16-70(1) on or before the payment day; or

(b) all of the following subparagraphs apply:

(i) the individual became a director of the company after the payment day;

(ii) the individual was still a director of the company 30 days after becoming a director;

(iii) the company did not pay the total of those amounts to the Commissioner in accordance with subsection 16-70(1) on or before the last of those 30 days.

Amount of tax

(3) The amount of the *PAYG withholding non-compliance tax the individual must pay is the lesser of:

(a) the extent of the credit mentioned in paragraph (1)(d); and

(b) the total amount the company did not pay to the Commissioner as mentioned in paragraph (1)(c).

18-130 Directors of non-complying companies - tax reduced in certain circumstances

(1) The amount of the *PAYG withholding non-compliance tax the individual must pay as mentioned in section 18-125 is reduced if the Commissioner gives a notice to the individual under this section.

Notice

(2) The Commissioner must give a written notice to the individual on a day (the reduction notice day ) (whether before, on or after the day (if any) the Commissioner gives the individual the relevant notice under section 18-140), if the Commissioner is satisfied that:

(a) because of illness or for some other good reason, it would have been unreasonable to expect the individual to take part, and the individual did not take part, in the management of the company at any time during the period:

(i) starting on a day on or by which the company was required to pay any of the total mentioned in paragraph 18-125(1)(c) to the Commissioner under subsection 16-70(1); and

(ii) ending on the reduction notice day; or

(b) the individual took all reasonable steps to ensure that one of the following happened:

(i) the directors (within the meaning of the Corporations Act 2001) of the company caused the company to pay the total of the amounts mentioned in paragraph 18-125(1)(c) to the Commissioner;

(ii) the directors caused an administrator of the company to be appointed under section 436A, 436B or 436C of the Corporations Act 2001;

(iii) the directors caused the company to begin to be wound up (within the meaning of that Act);

or there were no reasonable steps the individual could have taken to ensure that any of those things happened.

(3) In determining what are reasonable steps for the purposes of paragraph (2)(b), the Commissioner must have regard to:

(a) when, and for how long, the individual was a director and took part in the management of the company; and

(b) all other relevant circumstances.

Amount of reduction

(4) The amount of the reduction is the amount stated in the notice.

(5) In determining the amount to state in the notice, the Commissioner must have regard to:

(a) in a case to which paragraph (2)(a) applies - when, and for how long, the individual could not have been expected to take part, and did not take part, in the management of the company; and

(b) in a case to which paragraph (2)(b) applies - when, and for how long, the individual was a director and took part in the management of the company; and

Effect of reduction

(6) The amount of the *PAYG withholding non-compliance tax the individual must pay is treated as always having been that amount as reduced under this section.

18-135 Associates of directors of non-complying companies

Liability to pay PAYG withholding non-compliance tax

(1) An individual must pay *PAYG withholding non-compliance tax in relation to a company for an income year of the individual if:

(a) at a time when another individual (the director ) was a director (within the meaning of the Corporations Act 2001) of the company, the first individual was an *associate of the director; and

(b) the company was required to pay to the Commissioner under subsection 16-70(1) in this Schedule amounts:

(i) the company withheld from *withholding payments the company made to any entities during the income year of the individual; and

(ii) to which subsection (2) of this section applies; and

(d) subsection (3) or (6) of this section applies; and

(e) a credit to which the individual is entitled under section 18-15 is attributable to an extent to *amounts withheld by the company under Division 12 from withholding payments made to the individual during the income year of the individual.

Note: For the purposes of paragraph (1)(e), it does not matter whether the company pays the amounts withheld from the withholding payments made to the individual to the Commissioner under subsection 16-70(1).

(2) This subsection applies to *amounts withheld that the company was required to pay to the Commissioner on or before a particular day (the payment day ) under subsection 16-70(1), if:

(a) all of the following subparagraphs apply:

(i) the director was a director (within the meaning of the Corporations Act 2001) of the company on the payment day;

(ii) the individual was an *associate of the director on the payment day;

(iii) the company did not pay the total of those amounts to the Commissioner in accordance with subsection 16-70(1) on or before the payment day; or

(b) all of the following subparagraphs apply:

(i) the director became a director of the company after the payment day;

(ii) the director was still a director of the company 30 days after becoming a director;

(iii) the individual was an *associate of the director throughout that 30 day period;

(iv) the company did not pay the total of those amounts to the Commissioner in accordance with subsection 16-70(1) on or before the last of those 30 days.

(3) This subsection applies if the Commissioner is satisfied that:

(a) because of:

(i) the individual’s relationship with the director; or

(ii) a relationship of the individual with the company;

the individual knew, or could reasonably have been expected to know, of the company’s failure to pay the total of the amounts mentioned in paragraph (1)(c) to the Commissioner; and

(b) none of the following subparagraphs applies:

(i) the individual took all reasonable steps to influence the director to cause the company to notify the Commissioner under Subdivision 18-C of the relevant *amounts withheld;

(ii) the individual took all reasonable steps to influence the director to cause one of the events mentioned in subsection (4) to happen, or there were no reasonable steps the individual could have taken to influence the director to cause any of those events to happen;

(iii) the individual reported the company’s non-payment to the Commissioner or to another authority with responsibilities relevant to the operation of the company.

Example: Other authorities with responsibilities relevant to the operation of the company could include the Minister, the police, the Australian Securities and Investments Commission or the Building and Construction Industry Commissioner.

(4) The following are the events:

(a) the company pays the total of the amounts mentioned in paragraph (1)(c) to the Commissioner;

(b) an administrator of the company is appointed under section 436A, 436B or 436C of the Corporations Act 2001;

(5) In determining what are reasonable steps for the purposes of paragraph (3)(b), have regard to:

(a) when, and for how long, the individual was an *associate of the director; and

(b) when, and for how long, the director was a director and took part in the management of the company; and

(6) This subsection applies if:

(a) the individual was an employee of the company; and

(b) the Commissioner is satisfied that the company treated the individual more favourably than it treated other employees of the company.

Amount of tax

(7) The amount of the *PAYG withholding non-compliance tax the individual must pay is the lesser of:

(a) the extent of the credit mentioned in paragraph (1)(e); and

(b) the total amount the company did not pay to the Commissioner as mentioned in paragraph (1)(c).

18-140 Notices

Notices

(1) The Commissioner must not commence proceedings to recover:

(a) the *PAYG withholding non-compliance tax an individual must pay for an income year in relation to a company as mentioned in section 18-125 or 18-135; or

(b) any related *general interest charge payable under section 18-150;

unless, after the non-compliance day mentioned in section 18-125 or 18-135, the Commissioner gives a written notice to the individual under this section.

(2) The Commissioner may only give the notice if the Commissioner is satisfied, on the basis of information available to the Commissioner, that it is fair and reasonable for the individual to pay *PAYG withholding non-compliance tax in relation to the company for the income year.

(3) The Commissioner must not give the notice on a day if, on that day:

(a) the individual; or

(b) in a case to which section 18-135 applies - the director mentioned in that section;

is liable to pay to the Commissioner a penalty under Division 269 because the company has not complied with the obligation mentioned in item 1 of the table in subsection 269-10(1) to pay to the Commissioner an *amount withheld to which paragraph 18-125(1)(b) or 18-135(1)(b) applies.

(4) The notice must specify:

(a) the company; and

(b) the income year; and

Effect of compliance between non-compliance day and notice day

(5) Subsections (6) and (7) apply if:

(a) the company’s liability to pay the total of the amounts mentioned in paragraph 18-125(1)(c) or 18-135(1)(c) to the Commissioner is discharged to any extent during the period:

(i) starting on the day after the non-compliance day; and

(ii) ending on the day before the day the Commissioner gives the notice under this section to the individual; and

(b) had all discharges of the company’s liability occurring during that period occurred before the non-compliance day:

(i) the individual would not have been required to pay the *PAYG withholding non-compliance tax in relation to the company for the income year; or

(ii) the amount of PAYG withholding non-compliance tax the individual would have been required to pay would have been less than the actual amount of PAYG withholding non-compliance tax.

(6) The amount of the *PAYG withholding non-compliance tax the individual must pay is reduced:

(a) in a case to which subparagraph (5)(b)(i) applies - to nil; or

(b) otherwise - to the amount of PAYG withholding non-compliance tax the individual would have been required to pay as mentioned in subparagraph (5)(b)(ii).

(7) The amount of the *PAYG withholding non-compliance tax the individual must pay is treated as always having been that amount as reduced under subsection (6).

18-145 When PAYG withholding non-compliance tax must be paid

(1) The *PAYG withholding non-compliance tax an individual must pay for an income year is due and payable at the earliest time any of the income tax the individual must pay for the *financial year to which the income year relates is due and payable.

Note: Division 5 of the Income Tax Assessment Act 1997 explains how to work out when to pay your income tax.

(2) For the purposes of subsection (1), if the individual is not required to pay income tax for the *financial year:

(a) treat the individual as being required to pay income tax for the financial year; and

(b) if the Commissioner has made an assessment that the income tax the individual is required to pay is nil - treat that assessment as being for an amount greater than nil.

Note: See Part 4-15 in this Schedule for collection and recovery provisions.

18-150 General interest charge payable on unpaid PAYG withholding non-compliance tax

If an amount of *PAYG withholding non-compliance tax that an individual must pay to the Commissioner remains unpaid after the time by which it is due to be paid, the individual is liable to pay *general interest charge on the unpaid amount of tax for each day in the period that:

(a) started at the beginning of the day by which the unpaid amount of tax was due to be paid; and

(b) finishes at the end of the last day, at the end of which, any of the following remains unpaid:

(i) the unpaid amount of tax;

(ii) general interest charge on any of the unpaid amount of tax.

18-155 Validity of decisions and evidence

(1) Section 175 of the Income Tax Assessment Act 1936 (validity) applies to a decision of the Commissioner under section 18-140 in this Schedule in the same way as it applies to an assessment.

(2) Section 177 of the Income Tax Assessment Act 1936 (Evidence) applies to a notice under section 18-140 in this Schedule in the same way as it applies to a notice of assessment.

18-160 Rights of indemnity and contribution

(1) This section applies if an individual must pay *PAYG withholding non-compliance tax as mentioned in section 18-125 or 18-135 because a company did not pay an amount to the Commissioner as mentioned in paragraph 18-125(1)(c) or 18-135(1)(c).

(2) The individual has the same rights (whether by way of indemnity, subrogation, contribution or otherwise) against the company or anyone else as if:

(a) the individual had made a payment equal to the amount of the *PAYG withholding non-compliance tax under a guarantee of the liability of the company to pay the amount to the Commissioner; and

(b) under the guarantee:

(i) the individual; and

(ii) every individual to whom subsection (3) applies;

were jointly and severally liable as guarantors (but only, in the case of an individual to whom subparagraph (ii) of this paragraph applies, to the extent to which subsection (3) applies to the individual); and

(c) any credit to which the individual mentioned in subsection (1) is entitled under section 18-170 or 18-175 in relation to the amount of PAYG withholding non-compliance tax were a repayment of the payment mentioned in paragraph (a) of this subsection.

(3) This subsection applies to an individual to the extent that:

(a) the individual was a director (within the meaning of the Corporations Act 2001) of the company on the day (the payment day ) on or by which the company was required to pay the amount mentioned in subsection (1) to the Commissioner; or

(b) both of the following subparagraphs apply:

(i) the individual became a director of the company after the payment day;

(ii) the individual was still a director of the company 30 days after becoming a director.

(4) However, subsection (3) does not apply to an individual to the extent that the amount of the *PAYG withholding non-compliance tax the individual must pay in relation to the company for the income year as mentioned in section 18-125 is reduced under section 18-130.

Credits for later compliance

18-165 Credits for later compliance - scope

Sections 18-170, 18-175 and 18-180 apply if:

(a) an individual must pay *PAYG withholding non-compliance tax in relation to a company for an income year because the company did not pay to the Commissioner the total of the amounts mentioned in paragraph 18-125(1)(c) or 18-135(1)(c); and

(b) the Commissioner gives to the individual a notice under section 18-140 on a particular day (the tax notice day ) in relation to the PAYG withholding non-compliance tax the individual must pay; and

(c) on or after the tax notice day, the company’s liability to pay the total of the amounts to the Commissioner is discharged to any extent.

18-170 Credits for later compliance - Commissioner must give notice in certain circumstances

Commissioner must give notice to director or associate in certain circumstances

(1) The Commissioner must give a written notice to the individual on a particular day (the credit notice day ) if, had the discharge mentioned in paragraph 18-165(c) (and all previous discharges of the company’s liability mentioned in that paragraph) occurred before the tax notice day:

(a) the individual would not have been required to pay the *PAYG withholding non-compliance tax in relation to the company for the income year; or

(b) the amount of PAYG withholding non-compliance tax the individual would have been required to pay would have been less than the actual amount of PAYG withholding non-compliance tax.

Note 1: Subsection 18-180(2) provides that the Commissioner must not give a notice to the individual in certain circumstances.

Note 2: The amount of PAYG withholding non-compliance tax may be limited by:

(a) the conditions in subsections 18-125(1) and (2) or 18-135(1) to (6); or

(b) the limits on the amount of the tax in subsection 18-125(3) or 18-135(7).

Note 3: In working out the actual amount of the tax for the purposes of paragraph (1)(b), have regard to other credits to which the individual is entitled under this section or section 18-175. See subsection 18-180(1).

Director or associate entitled to credit if Commissioner gives notice

(2) The individual is entitled to a credit if the Commissioner gives a written notice to the individual under subsection (1).

(3) The individual becomes entitled to the credit on the day the Commissioner gives the notice to the individual.

Amount of credit

(4) The amount of the credit is the amount stated in the notice.

(5) In a case to which paragraph (1)(a) applies, the amount stated must be the amount of the *PAYG withholding non-compliance tax.

(6) In any other case, the amount stated:

(a) must not exceed the amount of the *PAYG withholding non-compliance tax; and

(b) must not exceed the amount of the discharge mentioned in paragraph 18-165(c); and

(i) the amount of the PAYG withholding non-compliance tax; exceeds

(ii) the amount that would have been the amount of the PAYG withholding non-compliance tax had the discharge mentioned in paragraph 18-165(c) (and all previous discharges of the company’s liability mentioned in that paragraph) occurred before the tax notice day.

(7) In determining the amount to state in the notice in a case to which paragraph (1)(a) does not apply, the Commissioner must have regard to what is fair and reasonable in the circumstances.

18-175 Credits for later compliance - Commissioner may give notice

Commissioner may give notice to director or associate

(1) The Commissioner may give a written notice to the individual on a particular day (the credit notice day ).

Note: Subsection 18-180(2) provides that the Commissioner must not give a notice to the individual in certain circumstances.

Director or associate entitled to credit if Commissioner gives notice

(2) The individual is entitled to a credit if the Commissioner gives a written notice to the individual under subsection (1).

(3) The individual becomes entitled to the credit on the day the Commissioner gives the notice to the individual.

Amount of credit

(4) The amount of the credit is the amount stated in the notice.

(5) The amount stated:

(a) must not exceed the amount of the *PAYG withholding non-compliance tax; and

Note: In working out the amount of the tax for the purposes of paragraph (5)(a), have regard to other credits to which the individual is entitled under section 18-170 or this section. See subsection 18-180(1).

(b) must not exceed the amount of the discharge mentioned in paragraph 18-165(c).

Commissioner’s discretion

(6) In determining:

(a) whether to give a notice under this section; or

(b) the amount to state in the notice;

the Commissioner must have regard to what is fair and reasonable in the circumstances.

18-180 Effect of earlier credits

(1) A reference in section 18-170 or 18-175, or subsection (2) of this section, to the amount of the *PAYG withholding non-compliance tax is treated as being a reference to:

(a) the amount of the PAYG withholding non-compliance tax; less

Note: The amount of the PAYG withholding non-compliance tax may, in a case to which section 18-125 applies, be affected by reductions under section 18-130.

(b) the total of any credits to which the individual is entitled in relation to the amount of PAYG withholding non-compliance tax because of notices given to the individual under section 18-170 or 18-175 before the credit notice day.

(2) The Commissioner must not give a written notice to the individual under section 18-170 or 18-175 if, on the day before the credit notice day, the amount of the *PAYG withholding non-compliance tax is nil.

Other provisions

18-185 When Commissioner may give notice

The Commissioner may give a notice to the individual on a day (the notice day ) under section 18-130, 18-140, 18-170 or 18-175 if:

(a) on the notice day, the Commissioner has not given a notice of assessment to the individual for the income year mentioned in section 18-125 or 18-135; or

(b) if the notice would:

(i) in the case of a notice under section 18-130 - result in the individual being liable to pay *PAYG withholding non-compliance tax or an increased amount of PAYG withholding non-compliance tax; or

(ii) in the case of a notice under section 18-140 - result in the Commissioner being able to commence proceedings to recover PAYG withholding non-compliance tax, or an increased amount of PAYG withholding non-compliance tax, from the individual; or

(iii) in the case of a notice under section 18-170 or 18-175 - reduce the amount of a credit or disentitle the individual to a credit;

the Commissioner gives the notice no later than 2 years after first giving a notice of assessment to the individual for the income year mentioned in section 18-125 or 18-135; or

(i) in the case of a notice under section 18-130 - result in the individual being liable to pay no PAYG withholding non-compliance tax, or a reduced amount of PAYG withholding non-compliance tax; or

(ii) in the case of a notice under section 18-140 - result in the Commissioner no longer being able to commence proceedings to recover PAYG withholding non-compliance tax, or result in the Commissioner being able to commence proceedings to recover a reduced amount of PAYG withholding non-compliance tax, from the individual; or

(iii) in the case of a notice under section 18-170 or 18-175 - increase the amount of a credit or entitle the individual to a credit;

the Commissioner gives the notice no later than 4 years after first giving a notice of assessment to the individual for the income year mentioned in section 18-125 or 18-135; or

(d) in any case - the Commissioner gives the notice:

(i) to give effect to a decision on a review or appeal; or

(ii) as a result of an objection made by the individual or pending a review or appeal.

18-190 Review of decisions

An individual to whom the Commissioner gives a notice under section 18-140 in relation to an amount of *PAYG withholding non-compliance tax may object, under Part IVC of this Act, against a decision of the Commissioner under section 18-130, 18-140, 18-170 or 18-175 in relation to the PAYG withholding non-compliance tax if the individual is dissatisfied with the decision.

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