Budget 2018 – creditors, are you prepared?

Treasurer Scott Morrison outlined changes to corporations and taxation laws in Australia on Tuesday, 8 May 2018. Treasurer’s announcement included the announcement of the expansion of the Director Penalty Regime.

What is the regime?

The Director Penalty Regime allows the Australian Tax Office to hold company directors legally responsible for ensuring that their company meets its pay as you go (PAYG) withholding and superannuation guarantee charge (SGC) obligations. If a company fails to comply with their obligations under the PAYG withholding system or the SGC provisions, company directors can be held personally liable for the amount the company should have paid.

Under the new expansion, this regime will now expand to GST, luxury car tax and wine equalisation tax.

How does this affect you as a creditor?

The ATO is regularly one of the largest unpaid and unsecured creditors. The expansion of the Director Penalty Regime will be a shift of great magnitude. The potential for a large change to the ‘creditor balance’ is concerning for other creditors.

The ATO will be considered as an important creditor to businesses. If this expansion comes into force, Directors are more likely to ensure that their businesses pay GST amounts owed to the ATO, potentially to the detriment of other creditors.

If you are a creditor, you should:

• Use the Personal Property Securities Register (PPSR) to ensure your interest is registered and secured;
• Ensure your terms and conditions (especially retention of title clauses) are compliant in light of the Personal Property Securities Act 2009 (Cth) (PPSA); and
• Remember you may not be the only creditor – do not forget the ATO and their grip on your debtor’s directors.

How Macpherson Kelley can help

Macpherson Kelley’s lawyers have extensive technical knowledge and industry experience advising on PPSA law. We can help provide practical PPSR advice, review and create tailored terms and conditions to ensure that you receive maximum protection as a creditor. For more information, please contact our team.