Unpaid contractor SG biggest tax risk

Contractors are kryptonite to company directors when it comes to unpaid superannuation payments, a tax partner believes.

Responding to the Senate inquiry into the non-payments of superannuation guarantee (SG), chartered accounting firm, Pilot Partners, said any company director in any sector that dealt with sub-contractors could be exposed by the Australian Taxation Office (ATO).

Pilot Partners tax partner, Murray Howlett, said it was an easy space to make mistakes and that many directors did not recognise their responsibility.

"Superannuation penalties are a big one and directors need to know that they can be personally liable for super that they didn't pay in respect to contractors," Howlett said.

"You think you know where these liabilities start and stop, but there are multiple ways under multiple tax laws where different parties can be liable."

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Howlett said company directors could be liable for super payments for many years and not just the standard three or four year period, and were unable to hide behind complex company structures or family trusts from backdated claims.

"There is a strong belief that a company is separate from its owners, however, the government regulator has created trap doors you can fall through in this... and more and more people are getting caught short five or six years after the laws were introduced," he said.

"There is no secret that the ATO is looking for revenue and contractors are kryptonite. If you do hire a contractors, then make sure they have a proprietary limited company otherwise your exposure to further claims is very real."