Legislative Assembly for the ACT: 2004 Week 08 Hansard (Tuesday, 3 August 2004) . . Page.. 3297 ..
was not meant to target them, yet it does affect them. I think more time was needed to work through the implications of that. The legal entity of a limited liability corporation was developed to make it more attractive for people to invest in business ventures and make it simpler for many people to share an interest in business.
There are different views about how well this model has served us. However, the model has served us very well in the non-profit sector where people have been able to serve voluntarily on the boards of incorporated charitable and community entities, knowing that they will not be personally liable if something goes wrong and it is not due to their own wrongdoing. This bill removes that protection that directors of corporations have enjoyed up to this point.
I support the intention of this bill. I think most people would find it hard to argue that a director who has presided over a string of company collapses, each leaving unpaid tax debits, should be able to escape liability. The situation is grey where a company goes bankrupt simply because its creditors default. Chains of bankruptcies in the construction sector can be triggered by the fall of one major building company that folds with large debts to a number of small suppliers. The suppliers would not be at fault, but this law would catch them if they also went bankrupt.
It is worth remembering that the ACT taxation component of a company’s overall liabilities would be small, and there has been a general shift towards personal liability of company directors for tax debts. However, the situation can be considered differently for community organisations. I do not think there is a major problem in the territory with fly-by-night community organisations starting and then winding up without paying due taxes. There is not the same scope for profit in the non-profit sector, so there is not the same scope for corruption. However, this law will apply to directors of community organisations and the government has failed to consult with the community sector to learn of their views on this proposed change. My main concern is that the existence of a risk of personal liability will serve as a disincentive to people to serve on boards as volunteers of non-profit organisations. That would be an unfortunate and unintended outcome that I was hoping to allay.
Despite the limited intended scope expressed by the Treasurer in his tabling speech, this is a sweeping bill that catches every director of every community organisation with a corporate structure. Although the government stated that the bill is primarily targeted at payroll tax debts, which are rarely, if ever, incurred by not-for-profit organisations, it does cover all taxes. That means taxes on insurance, duties on assets transfers and rates bills. Non-profit organisations could be liable for substantial liabilities in these different categories.
For example, a charity may be bequeathed a building. If they occupy only part of it and lease the rest to provide an income stream they are liable for rates on the part of the building that is leased out. That may result in a rates bill of many thousands of dollars. A voluntary director can then be made to pay every cent of the rates bill if the organisation is wound up and there are outstanding debts. So there are certain concerns that I think need to be worked through.
On balance, it may be that this legislation in its current form has no need for amendment and that the community sector is willing to take it on board as part of the conditions of