Yesterday the Government introduced the Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 into the House of Representatives. The Bill implements four measures to combat illegal phoenixing activity that were announced in the 2018-19 Budget.The measures include three that impact GST:

• • extending the power of the Commissioner to make estimates of tax to include an entity’s “net amount” under the GST Act;
  • 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;
  • expanding the ATO’s power to retain refunds where there are outstanding tax lodgements.

The documents can be accessed as follows:

• • Bill
  • Explanatory Memorandum

My post discussing the Budget announcements can be accessed here.

Summary of the proposed legislation

Estimates

The Commissioner currently has the power in Division 268 of Schedule 1 to the Taxation Administration Act (TAA) to make estimates of an entity’s liability to pay PAYG withholding and superannuation guarantee charge and to recover the amount of those estimates from taxpayers. A taxpayer becomes liable to pay an estimate when the Commissioner gives notice of the estimate to the taxpayer.

The Bill proposes to extend the estimates regime to include an entity’s “net amount” under the GST Act. This will include any applicable LCT and WET. Because an entity is not under an obligation to pay a net amount until it has been assessed (either by the lodgement of an activity statement or the making of an assessment by the Commissioner), the proposed amendments will deem the estimated net amounts to be payable. Further, the net amount is deemed to be payable on the day that the entity was required to lodge its GST return.

The amendments will apply to the first tax period after the date of royal assent.

Director Penalty Notices

The director penalty regime in Division 269 of Schedule 1 to the TAA makes directors of a company personally liable for specified taxation liabilities of the company in certain circumstances of non-payment by the company. The regime presently includes PAYG withholding, superannuation guarantee charges and estimates of those amounts made by the Commissioner under Division 268.

The Bill proposes to extend the regime to include a company’s unsatisfied liabilities to pay net amounts and GST instalments, including estimates of those amounts made by the Commissioner.

It will be a defence if the director was unable to comply with the obligation due to illness or other good reason, or that the director took all reasonable steps to comply with the obligation. It will also be a defence if the company adopted a reasonably arguable position and the company took reasonable care.

The amendments will apply to the first tax period after the date of royal assent.

Retention of refunds

The Commissioner is currently authorised to retain refunds where the taxpayer has failed to provide a BAS (s 8AAZLG of Schedule 1 to the TAA) or where the Commissioner is verifying information provided by the taxpayer (s 8AAZLGA). 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 amount of the refund.

The amendments will apply to refunds the Commissioner is otherwise required to pay on or after the date of royal assent.