The Director Penalty Notice (DPN) regime administered by the Australian Tax Office (ATO) has undergone significant revisions.
A DPN is a notice that the ATO can send to a company director, making them personally liable for tax debt. This includes PAYGW, GST and superannuation guarantee. Company directors have a responsibility to ensure these obligations are reported and paid on time.
Once the DPNs have been issued, the ATO can commence recovery action against each director for the full amount owing.
There are two types of DPNs, “non-lockdown DPN” and “lockdown DPN” which can be issued by the ATO to directors.
A non-lockdown DPN may be issued when a company has reported GST or PAYGW liabilities within three months of the due dates or SGC by the reporting deadline, but have not paid the relevant amounts due.
A lockdown DPN may be issued when a company has failed to lodge or pay GST or PAYGW within three months of the due date or SGC by the due date. Where necessary, the ATO will estimate the debt due.
To avoid personal liability, if a director receives a non-lockdown DPN, they must do one of the following within 21 days:
Entering into a payment arrangement with the ATO is no longer an option available.
The penalties under a lockdown DPN are more severe, with payment of the debt in full the only option available to directors to avoid the personal liability.
Former directors can be issued with a DPN if the debt was incurred during their term as a director.
New directors can avoid personal liability for debt that was due prior to their appointment if within 30 days of appointment the company pays the debt in full or appoints a liquidator, administrator or small business restructuring practitioner. If one of these do not occur, a new director can be subject to a DPN for debt due before their appointment.
To avoid DPNs, a company should always lodge and pay obligations to the ATO within relevant timelines and always keep an open line of communication with the ATO.
If you receive a DPN, ensure it is acted upon quickly. There are limited defences available to directors.
AFS & Associates are your partners in providing peace of mind. If you have any questions in relation to director penalty notices, please contact us on 03 5443 0344.