Director Penalty Notice
So, you’ve received a Director Penalty Notice (DPN)?
If you have received an ATO Director Penalty Notice, your first instinct might be to panic – especially if your current accountant just isn’t equipped to give you sound Director Penalty Notice advice.
First and foremost, know that, although an ATO DPN can be serious, you don’t need to freak out right away. There are solutions.
Here at Pherrus, we know Director Penalty Notice legislation inside and out. Read on to learn how you can overcome this hiccup and get your finances in order.
What is a Director Penalty Notice?
A Director Penalty Notice (DPN) is a notice issued by the Australian Tax Office (ATO) informing a director that they may be personally liable for two types of company tax debt:
- Pay As You Go (PAYG)
- Superannuation Guarantee Charge (SGC)
As a company director, you have a responsibility to ensure that your company meets its payment obligations under the PAYG and SGC schemes outlined by the ATO. In mid-2012, the director penalty regime was strengthened. And now, directors can more easily be held liable for unpaid funds.
Two types of DPN from the ATO
If you have received a DPN, it will fall into one of two categories: Non-Lockdown DPN or Lockdown DPN. Let’s take a look at these in a little more detail, so you can better understand your best path forward.
What happens when you receive a Non-Lockdown DPN?
If you have lodged BAS or IAS within three months of the due date but have PAYG withholding and SGC debts unpaid, you will most likely receive a Non-Lockdown DPN.
The notice will give you 21 days to remedy the debt by undertaking one of the following three actions:
- Paying the debt in full
- Assigning a Voluntary Administrator
- Putting your company into liquidation
If you successfully complete one of the above, you will not be held personally liable.
What happens when you receive a Lockdown DPN?
If you have failed to lodge BAS or IAS within three months of the due date, you, as the director, will automatically become liable. You do not have the 21-day window to fix the situation. Instead, you must pay the debt in full or enter into personal insolvency.
What are your possible defences?
If you can establish one of the following defences, you will not be held personally liable under a Director Penalty Notice:
- You did not take part in the management of the company when the liability was incurred. This might be due to illness, a family emergency, or another serious reason.
- You took all the steps available to you to ensure the following:
- The company paid the debt
- A Voluntary Administrator was appointed
- The company is winding up
Get Quality Director Penalty Notice Advice
To ensure you achieve the best possible outcome, act fast. Get in touch with the team at Pherrus today – we can assist with all DPN issues, from Director Penalty Notices issued after Liquidation to new directors that have received a DPN.
Contact us on 02 8883 3352 today
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