Rex Patrick (SA, Centre Alliance) Share this | Hansard source

I have a question for the minister in relation to the main bill. It relates to the tax liability—that is, GST liability that is assigned to a director. I understand the reasoning behind that, and Centre Alliance are supportive of that. However, as I said in my contribution to the second reading debate, it's always been the intention of the corporate veil not to act as a barrier to dealing with misconduct or breach of regulations. The intent of that was to apply to people who start up a company operating in good faith and who come across some misfortune that was unintended and end up in a situation where they bear the liability. That can be a disincentive to investment. In that context I'd like to ask a question, and perhaps give an example. I'm trying to understand how the tax office will deal with situations where you have an unintended consequence. I'll start by saying that a scenario might involve a company, 'Our Perfect Company Pty Ltd'. They are doing work with an overseas company that is providing services. The company employs three subcontractors—small businesses. They might each do $100,000 worth of work, and of course the company is waiting on a $500,000 payment to cover off on the work done by each of the three subcontractors and, obviously, some work that the company themselves have done.

The company has the ability to pay their own tax liabilities. As is often the case, they may be working on other projects. They have cash in the bank and can meet the liabilities, but suddenly the overseas entity indicates to them that they can't pay the bill, that they are not going to be able to pay the bill for another month or month and a half. That leaves the director in a position where he has to go to the subcontractors. I have personally been in this sort of situation where a subcontractor is new in business and doesn't have cash reserves and is struggling. So the director is now faced with a choice—'Do I use the reserves of cash to pay my GST liabilities or my tax liabilities, or do I pay my subcontractor with the hope that I eventually get paid from oversees, knowing full well that if I don't pay the subcontractor they'll go under and I like the subcontractor; they do good work?' That's the sort of situation that you can confront. I personally confronted that exact situation in relation to business. I just want to understand how the tax office will deal with those sorts of circumstances. What measures are in place to make sure that the tax office is going to be reasonable in those sorts of circumstances?