What is a Director Penalty Notice?

 

A Director Penalty Notice (DPN) is a serious form issued by the Australian Taxation Office (ATO) that can make directors personally liable for certain tax debts of their company.

Understanding these notices is crucial for any director to manage potential liabilities effectively.

 

Tax Debts Covered Under Director Penalty Notices

 

• Pay As You Go (PAYG) Withholding
• Superannuation Guarantee Charge (SGC)
• Goods and Services Tax (GST)

 

Responsibilities for New Directors

 

New directors have a 30-day window post-appointment to address any outstanding tax debts to avoid personal penalties.

 

Remedial Actions

 

• Pay the debt fully.
• Appoint an administrator.
• Initiate company liquidation.

 

Different Types of Director Penalty Notices

 

Non-lockdown DPN

The Non-Lockdown DPN gives directors the flexibility to address the company’s tax debts without immediate personal liability, provided they act within the specified timeframe.

Allows 21 days for directors to act by paying the debt, appointing a restructuring practitioner, a voluntary administrator, or initiating company liquidation.

 

Lockdown DPN

A Lockdown DPN is issued when a company fails to report PAYG and SGC obligations by the due date.

Under a Lockdown DPN, directors are automatically held personally liable for these debts; the options available under a Non-Lockdown DPN (like appointing an administrator or beginning insolvency proceedings) will not absolve the directors of liability.

The only recourse for directors under a Lockdown DPN is to pay the debt in full.

 

Updated ATO Collection & Enforcement Trends

 

ATO’s Current Focus

The ATO has heightened its enforcement actions post-pandemic, focusing on:

• Collecting unpaid superannuation.
• Targeting entities with significant debts and poor compliance records.
• Using DPNs aggressively as a primary enforcement tool.

 

Changes in Payment Plans

Recent changes have seen the ATO become stringent with payment plans, demanding more information and quickly demanding full payment if defaults occur.

Notably, entering into a payment plan does not remit a DPN, and directors remain vulnerable to insolvent trading claims.

 

Insolvency Alternatives

 

For businesses struggling with tax debts, the ATO views Small Business Restructuring (SBR) and Voluntary Administration (VA) positively.

These methods can offer more flexible and less punitive options than traditional payment plans or liquidation.

 

Proactive Steps for Directors

 

Preventative Measures

• Lodge all tax documents on time.
• Keep director addresses up to date.
• Engage proactively with the ATO to discuss debts.

 

If Issued a DPN

• Consult immediately with a taxation solicitor.
• Evaluate the feasibility of payment arrangements or restructuring.
• Act swiftly to comply with the terms of the DPN.

 

Contact Us

 

Addressing a DPN requires timely actions and a thorough understanding of your rights and responsibilities.

Directors facing a DPN should seek professional advice at the earliest to explore all available options, ensuring compliance and minimising personal financial risks.

For more information about Directors Penalty Notices, contact Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

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Related Blog – ATO Audits: Can They Be Avoided?