A timely reminder: the ATO and Director Penalty Notices
This year the Australian Taxation Office (“ATO”) have significantly increased enforcement action to recover tax debts. If you have unpaid tax liabilities, you could be faced with court proceedings, bankruptcy, or in the case of companies, liquidation. Directors may also be personally liable for some tax debts incurred by their company under the Director Penalty Notice (DPN) regime.
What is a DPN
DPNs are a mechanism allowing the ATO to collect unpaid company tax debts (primarily PAYG withholding, superannuation, GST) directly from directors.
There are 2 types of DPNs which can be issued when a company fails to pay its tax on time – a non-lockdown DPN and a lockdown DPN. The nature of the DPN depends upon whether the company has met its reporting obligations.
If a company has been lodging its BAS on time or within 3 months of it being due, then the ATO can issue a non-lockdown DPN. In this case, a director can escape personal liability by doing any of the following within 21 days of the issuing of the DPN:
ensuring the company pays the outstanding tax debt in full;
placing the company into administration or liquidation; or
appointing a small business restructuring practitioner.
Where the BAS is not lodged within 3 months of being due, then any DPN issued by the ATO will be a lockdown DPN. The director cannot escape personal liability for the company’s debts other than by the company paying the outstanding tax debt in full.
DPNs are issued to a director’s last known address disclosed in ASIC’s records and are deemed served on the date of issue, not receipt.
Entry into payment plans with the ATO is no longer an option to escape liability under DPNs, nor do they change the date that tax is due and payable for the purposes of DPNs.
Act now to avoid exposure
If you have outstanding company tax debt and your reporting obligations are not up to date, you may find yourself on the receiving end of a letter from the ATO or, worse still, a DPN.
Being proactive is important. If your company is struggling financially, including debts not just with ATO but with other creditors and banks, we specialise in providing a whole picture legal approach to analysing your position, assessing risks and advising on best outcomes to not only survive but succeed and grow.
We can help you navigate and manage these stressful times. If you are concerned about your personal exposure to company tax debt or have received a letter or DPN from the ATO, please contact Tony Scoglio on (07) 3833 2100.