By Edwin Narayan
The Australian Tax Office (ATO) has now begun their recovery debt collection by sending Director Penalty Notices and Director Penalty Notice Warnings. We had seen that the ATO recently paused their debt recovery processes due to the pandemic, and it looks like they are now in pursuit of unpaid taxes. A Director Penalty Notice (DPN) is a document sent from the ATO to a director of a company. This notice is issued towards the director to inform them they may be personally liable for the tax debts of the company. A director penalty notice is issued to director(s) of a company that has defaulted on their tax obligations. A Director Penalty Notice can make the director personally liable for the company’s tax debt set out in the notice if no action is taken. This is why it is important to act quickly by seeking professional help when you have received a Director Penalty Notice.
What is a Director Penalty Notice (DPN)?
A Director Penalty Notice is issued to director(s) of a company that has defaulted on their tax obligations. As a director, you are responsible for ensuring the company meets its tax obligations, which includes, keeping lodgements up to date, Pay As You Go withholding, Superannuation Guarantee Charge or GST. The Director Penalty Notice outlines the director is personally liable for the penalties that are equal to the unpaid funds.
What type of DPN have you received?
There are two types of Director Penalty Notices and deciphering the differences can be confusing. As a director you need to determine which type of Director Penalty Notice you have received from the ATO.
- 21-Day Director Penalty Notice
- Lockdown Director Penalty Notice
21-Day Director Penalty Notice
A 21-Day Director Penalty Notice is a Director Penalty Notice that requires ”action” within a 21-day period. The 21-Day director penalty notice is issued by the ATO when the company’s tax liabilities have not been paid, however, have been reported to the ATO within a three-month period.
If you have received a 21-day director penalty notice it is best to act quickly, speak to our experts today on 02 9220 7100.
Lockdown Director Penalty Notice
Lockdown Director Penalty Notice is issued when a company’s tax debt is not paid and have not been reported to the ATO within the last three months of the due date.
As soon as you receive any type of director penalty notice it is highly recommended to contact an insolvency practitioner to ensure you do not become personally liable for the company’s debt. An insolvency practitioner can guide you to the best solution for your situation.
Get expert advice, speak to one of our insolvency experts today.
What are my options when I receive a DPN?
Receiving a director penalty notice can be daunting, especially when you do not know what your options are. We have outlined your five possible options to a director once a director penalty notice is issued.
Your possible options are:
- Repay the debt in full
- Enter an instalment agreement to repay the debt by entering into a non-formal agreement or payment plan
- Voluntarily wind up your company’s affairs through liquidation
- Appoint an administrator to enter Voluntary Administration
- Defend the director penalty notice
With each option, it is recommended you contact an insolvency practitioner to ensure you do not fall personally liable for the debt. An insolvency practitioner will also guide you correctly through the steps to ensure you do not enter any other consequences.
What are my liabilities if I’m a former director of a company who has received a Director Penalty Notice?
If you are a director of a former company who has received a Director Penalty Notice, you may still be liable for the company’s tax obligations. It is important to know that you can still be held responsible for the debt outlined in the director penalty notice, but there is a criteria that must be followed.
As a former director you can be liable if the following has occurred:
- The unpaid PAYG withholding, net GST or SGC liabilities were due before the date of your resignation
- The tax obligations of the company fell due after your resignation when:
- The PAYG withholding, net GST or the first withholding event in the reporting period occurred before your resignation
- The SGC liabilities date charge became payable.
If you are a former director of a company that has been issued with a director penalty notice, it’s important to understand what you can and cannot be liable for. Once you are aware of the director penalty notice being issued, you should speak to our experts straight away.
What happens if I ignore a Director Penalty Notice?
Ignoring a director penalty notice can have serious consequences. Any form of non-compliance can result in the following:
- You may become personally liable for the company’s tax debt
- You can be issued with a garnishee notice
Once receiving a director penalty notice, ignoring the notice can have serious consequences for you and your personal assets. The onus on being the director can be overwhelming, which is why we highly recommend contacting an insolvency practitioner as soon as possible.
Speak to one of our experts today, contact us on 02 9220 7100.