What is a Director's Penalty Notices (DPNs)
A DPN is a formal notice issued by the ATO to directors of companies with unpaid tax liabilities.The primary objective of DPNs is to hold directors personally liable for unpaid Pay As You Go (PAYG) withholding and Superannuation Guarantee Charge (SGC) liabilities of their company.
Ignoring a DPN can have severe consequences, including personal liability, recovery proceedings, and potential director disqualification.
Types of Director's Penalty Notices
There are two kinds of DPNs. Lockdown DPNs and Non-Lockdown DPNs.
Lockdown DPN
- A lockdown DPN is issued when a company fails to lodge its Business Activity Statements (BAS) or Superannuation Guarantee (SG) statements within three months of their due date for lodgement.
- If you receive a lockdown DPN, you become personally liable for the company's unpaid PAYG withholding and SGC amounts at the date the notice is issued. There is no option to have this penalty remitted by placing the company into administration or liquidation.
- You may receive a Lockdown DPN even after a company has been deregistered
Non-lockdown DPN
- Non-lockdown DPNs are issued when a company has lodged its BAS and SG statements on time however, failed to pay the outstanding amounts within three months of the due date.
- Upon receiving a non-lockdown DPN, directors have 21 days (from the date of the DPN - no receipt) to take one of three actions:
- pay the debt;
- appoint a voluntary administrator;
- or place the company into liquidation.
- If no action is taken, personal liability will be enforced.
What to Do If You Receive a DPN?
- Review the notice: Carefully read and understand the details mentioned in the DPN, including the amounts owed and the due date for action.
- Seek professional advice: Contact an experienced lawyer or accountant who specialises in director's obligations and these kinds of matters. They can guide you through the process and help determine the best course of action.
- Assess the company's financial situation: Evaluate the company's financial position to determine if it can pay the outstanding amounts. If not alternative options should be considered such as voluntary administration or liquidation.
- Promptly respond to the DPN: The 21 days to comply with a Non-lockdown DPN commences from the date of the DPN, not the date it was recieved by the director. You Ensure you take appropriate action within the specified timeframe to avoid further penalties or potential legal consequences.
- Communicate with the ATO: Engage in open communication with the ATO, providing them with necessary information, supporting documentation, and proposing a repayment plan if applicable.
- Consider professional representation: If the situation escalates or becomes legally complex, it may be beneficial to engage legal representation to protect your rights and interests.