Director liability changes a positive

Federal Budget changes making company directors personally liable when their company fails to pay employee superannuation payments could have far-reaching consequences but will ultimately benefit employees, according to Holding Redlich Lawyers.

The legislation, intended to target counter fraudulent and phoenix activity, could yet extend to all directors in a blanket approach, although we are yet to see the details, said Holding Redlich partner Jenny Willcocks.

If the legislation does end up taking a catch-all approach rather than being limited to cases where there has been a phoenix scheme in place, then it will have a significant impact on directors’ risk of personal liability, she said.

Even when there is no phoenix scheme in place a company director would usually be aware if their company is getting into trouble, and where super payments haven’t been passed onto the fund or wrongly used to pay company cash flow, she said.

The end result will be a positive from an employee or trustee perspective if it makes directors more aware and more focused on their responsibilities concerning employee super, she said.

The fact that there is discussion out there sends a positive message that the Government is taking the situation seriously from a deterrent point of view, meaning those tempted to use such schemes may think twice if they are more personally liable and there is greater capacity to go after the directors personally, she said.

What the situation really highlights is a need for an overhaul in the system of superannuation payments from employers to funds, with the lead time currently far too long and creating the potential for such dishonest conduct, Willcocks said.

If super payments had to be paid in the same way as wages, that would close the loophole allowing phoenix schemes to take place and would also benefit members, who are currently missing out on having their own money invested while it sits in an employer’s account, she said.