Director Penalty Notices

As the director of a company, you are responsible for ensuring that the company’s tax and super obligations are reported and paid on time. If your company does not pay certain liabilities by the due date, the ATO can recover these amounts from you personally as a current or former company director.

After putting a hold on debt collection due to COVID, the ATO has resumed and increased their debt-collecting activities.

We have noticed a significant increase in debt collection letters and phone calls for unpaid ATO debt. It is extremely important to ensure you are aware of your company’s ATO debts and are actively engaging with the ATO to get this debt paid. If you are unable to pay an amount owing to the ATO by the due date, you should consider putting a payment plan in place to ensure you are making frequent repayments.

If the ATO is not receiving payments, they may take the following steps to recover these amounts:

• Report the tax debt to credit reporting bureaus; or

• Issue the director with a DPN making them personally liable for the company’s debt.

What is a Director Penalty Notice (DPN)?

A director penalty notice is a notice that is sent from the ATO to a company’s director making them personally liable for the company’s unpaid amounts of:

• Pay as you go withholding (PAYG W)

• Goods and services tax (GST)

• Super guarantee charge (SGC)

Have you received a DPN?

If you have received a DPN and your company has reported the unpaid debt amounts within 3 months of the due date, you may be able to utilise the following options:

• Pay the debt in full

• Wind up the company through a liquidator

• Appoint an administrator to the company

• Appoint a small business restructuring practitioner

• Prove a defense to the director penalty notice

However, if your company has not reported the unpaid debts within 3 months of the due date, the only way to remit the penalty is to pay the debt.

You have 21 days from the date of issue of the notice to take action.

Our Advice

• Confirm how much you currently owe the ATO and make sure you have an active plan to repay this debt.

• If you do receive a DPN, contact your accountant immediately.

• Ensure that your address details with the ATO, ASIC and your accountant are updated. A DPN will be sent to the director’s address as listed with ASIC. Otherwise, they will send these notices to the last known address on their system. It is important to ensure this is up-to-date, as the date they post the letter is the date the notice is given to you.

• Lodge company tax returns on time and catch up with any overdue returns.

• Lodge quarterly and monthly BAS returns on time and ensure you are punctual with debts arising from lodgment.