CORPORATE TRUSTEE DIRECTORS PERSONALLY LIABLE FOR INCOME TAX?
Corporate trustee directors personally liable for income tax?
One of the hallmarks of the director penalty regime is that it applies parallel liability to company directors for, by way of broad summary, unpaid company PAYGW, GST and superannuation liabilities. The director penalty regime can affect directors of corporate trustees. However, income tax liabilities of a company are not typically parallel liabilities for company directors.
In fact, whether a DPN is 'lockdown' or not can depend on the lodgment of the relevant activity statement or SGC statement (as it then was prior to 1 July 2026). Late lodgments of income tax returns were not part of that specific consideration.
However, in the midst of the proposed minimum 30% discretionary trust tax announced at the recent Budget, Treasury has sought consultation from the industry.
On page 15 of the Consultation Paper, it reads:
“To ensure the minimum tax is paid by trustees, it may be necessary to implement complementary changes…These include:
Providing the Commissioner of Taxation a similar right of reimbursement from trust assets.
Making directors of corporate trustees jointly and severally liable to pay the minimum tax….”
This would be quite a grave step.
Should the directors of the corporate trustee be personally liable for tax in respect of a paper distribution the trust has received from another entity? What if there are recoverability issues there? The directors might face a battle to collect on a debt owing and to stave off the personal liability challenge from the Commissioner.
And a right of reimbursement to trust assets? Such powers have long been the traditional domain of a liquidator appointed to a corporate trustee. The liquidator can bring an application to Court to sell, or act as receiver over, trust assets. Does this mean that the Commissioner might have 'jumped in' first? Is that a voidable transaction under the corporations laws if the corporate trustee subsequently enters external administration and the trust assets have already been seized?
We will be keeping an eye on the consultation very closely. Link below.
Minimum tax on discretionary trusts
Smailes Krawitz routinely advises on tax compliance and representing taxpayers before the ATO, Administrative Review Tribunal or Federal Court, including tax debt recovery and director liabilities issues.
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