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Director Penalty Notice
So, you’ve received a Director Penalty Notice (DPN)?
What is a Director Penalty Notice?
- Pay As You Go (PAYG)
- Superannuation Guarantee Charge (SGC)
Two types of DPN from the ATO
What happens when you receive a Non-Lockdown DPN?
- Paying the debt in full
- Assigning a Voluntary Administrator
- Putting your company into liquidation
What happens when you receive a Lockdown DPN?
What are your possible defences?
- 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
A director penalty notice is an order received by the company's director from the Australian Taxation Office. This notice makes the director personally liable for specific corporate government obligations that have not been met. Director penalty notices may be applied if a company has tax debts for Pay As You Go (PAYG), Superannuation Guarantee Charge (SGC) or Goods and Services Tax (GST).
If you receive a director penalty notice from the ATO, you mustn't ignore this warning. Even if you are newly appointed for more than 30 days, you will be eligible to pay any tax debts that the company has incurred personally. Once you have received a penalty notice, there are limited options available to you. In most cases, you will be required to pay the tax debt within 21 days, with entire personal liability if you still do not pay.
It's important to note that, on a 21-day penalty, the clock starts from when the letter is sent, not received. If you have already reported unpaid amounts within three months of the due date, you also have the option to appoint a liquidator to wind up the company or go into administration. If this does not apply, your only option is to pay.
The traditional, 21-day penalty notice is the standard form of director penalty notice in cases where PAYG, Super or GST payments are outstanding. Within these 21 days, directors can respond to the notice by paying the debt, liquidating the company, going into administration, or agreeing to ongoing payment with the ATO. The 21-day notice usually applies if unpaid amounts are reported within three months of the deadline.
In contrast, the lockdown DPN does not offer 21 days for remittance through administration or liquidation. In lockdown vs. non-lockdown director penalty notice, the only option is to pay the funds owed, with directors made personally liable for unreported and unpaid debts. This difference means that if debts remain unpaid, the ATO can seek funds from their personal assets and funds. The ATO can simultaneously issue a lockdown and a 21-day penalty for different debts.
The key to director penalty notice prevention is to ensure your finances never reach a stage where your PAYG, SGC or GST is unpaid. Since 2012, the ATO has made steps to crack down on director responsibilities for tax debts incurred by the company. This means they take a tough stance in recovering funds from the company's director for debts, and there are very few instances where exceptions or defences apply.
Working with an outsourced, qualified accountancy service can ensure your payments are always on track and on time if you are struggling to keep on top of your finances. A professional accountant can prevent you from receiving a director penalty notice by ensuring you pay your GST, SGC and PAYG on time, every time. If you do have unpaid tax debt, your best option is to report it, though this will not prevent a DPN in most cases.