With many businesses still suffering from the financial fragility of COVID-19 and significant cash flow disruptions, the Australian Taxation Office (ATO) has begun enhancing debt collection powers against directors and other third parties.

What is a Director Penalty Notices (DPN)?

A DPN is a formal notification to a director advising that certain tax related liabilities are payable, even when the taxpayer company enters liquidation or administration. The ATO must first give directors a DPN outlining the unpaid amounts and remission options available.

As such, the ATO’s use of the DPN tool to encourage directors to ensure their company continues to lodge its tax compliance and pays tax liabilities on time.

What are the changes from 1 April 2020?

Prior to April 2020, the Deputy Commissioner of Taxation will be able to hold directors personally liable for

  • Pay As You Go Withholding (PAYG)
  • Superannuation Guarantee Charge (SGC)

From 1 April 2020, the Deputy Commissioner of Taxation expanded to include

  • Goods and Services Tax (GST)
  • Wine Equalisation Tax (WET)
  • Luxury Car Tax (LCT)

Types of DPN

There are 2 types of DPN’s: Non-Lockdown and Lockdown DPN’s.

Non-Lockdown DPN

These are issued to company directors when outstanding tax is reported within the following time frames but remains unpaid.

  • Business Activity Statements (BAS) and Instalment Activity Statements (IAS) within 3 months of the liability’s due date; and
  • Superannuation Guarantee Charge (SGC) statements within 1 month of the payment due date.

The options for the director under a non-lockdown DPN are:

  • Pay the outstanding amount; or
  • Place the company into voluntary administration or liquidation (within 21 days).

By putting the company into voluntary administration or liquidation, directors can avoid personal liability of the outstanding amounts.

Lockdown DPN

These are issued to company directors when the company fails to make BAS, IAS or SGC lodgements and the relevant amounts remain unpaid.  

The options for the Director under a lockdown DPN are:

  • Pay the outstanding amount;
  • Engage with the ATO and make an arrangement for payment; or
  • Appoint a liquidator, administrator, or a small business restructuring practitioner. However, directors will not avoid personal liability.

Are you at a risk of receiving a director penalty notice? DO NOT WAIT- Contact us immediately to discuss further.