Received a Director's Penalty Notice? - Brunet Law | Building and Construction, Insolvency, Disputes Lawyers Brisbane, Sunshine Coast and Gold Coast

Director's Penalty Notices

Have you received a Director's Penalty Notice?

As a director of a company, it's crucial to be aware of your responsibilities and obligations under the law. One such obligation is to ensure timely payment of certain tax liabilities. Failure to meet these obligations can result in the issuance of a Director's Penalty Notice (DPN) by the Australian Taxation Office (ATO).

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.

Frequently asked questions about Director's Penalty Notices

What are the consequences of director penalty notice?

Failing to respond to a director penalty notice can lead to significant repercussions. Disregarding any obligations may lead to the following outcomes: You might be held personally responsible for the company's tax obligations. Additionally, you may receive a garnishee notice.

What is a director penalty for superannuation?

The Australian Taxation Office (ATO) has the power to issue a Director Penalty Notice to recover unpaid PAYG Tax, GST, or Superannuation. Placing the company in liquidation or voluntary administration doesn't absolve one from liability. The ATO can issue Director Penalty Notices even after a company is already in liquidation or voluntary administration

What is director penalty notice after liquidation?

Indeed, the ATO retains the authority to issue a DPN once a company has entered liquidation or Voluntary Administration. The obligation owed by the director/s under a DPN represents an individual liability distinct from the company's debts and continues to be owed to the ATO despite the company's liquidation.

How do you avoid director penalty notice?

What steps can a director take to prevent receiving a director penalty notice? As a director, it's crucial to fulfill your PAYG and superannuation responsibilities diligently. Moreover, regularly verify that there are no unresolved tax debts with the ATO and maintain accurate and updated tax returns and records for the company. By adhering to these measures, directors can reduce the risk of receiving a director penalty notice.