Director Penalty Notice

IMG

I have received a director penalty notice, what should I do?

The director penalty notice is a time sensitive notice that if not acted on immediately, could
result in a director, or former director of a company being personally liable to the Australian
Taxation Office (ATO) for company debts.

Advice should be sought immediately to consider what options may be available to limit your
exposure.

What is a director penalty notice?

The director penalty notice regime is used by the Australian Taxation Office (ATO) to make recoveries from directors and former directors of companies, where those companies have not paid their liabilities to the ATO.

Not all obligations owing to the ATO are covered by the director penalty notice (DPN) regime.

How does it work?

As a director of a company, you are personally liable for the remittance of your company’s obligations to the ATO for PAYG withholdings, superannuation and net GST (which also includes luxury car tax and wine equalisation tax). These amounts are referred to as director penalties.

The ATO must issue a DPN before seeking to recover the director penalties.

The DPN will advise of the amount of the debt and specify which of those amounts are considered to be lockdown amounts (discussed later).

The DPN will also provide options to remit (avoid further prosecution of the claim by the ATO) the director penalties, which includes the following:

The above must be implemented within 21 days of the date of the DPN.

Where steps are taken to implement the above within the 21 day period, the director penalties will be remitted (meaning the ATO will not seek to further pursue the directors), subject to the exception as discussed below.

What is a lockdown amount?

A company is required to attend to the lodgement of Business Activity Statements (BAS) and provide further information regarding obligations to the ATO within certain time frames.

Where a company has failed to provide the information required (lodged BAS etc) within certain time frames, any amounts that remain owing to the ATO attributable to the late lodged (or not lodged) disclosures, are lock down amounts.

The DPN will list which of the company’s debts are lockdown amounts, and non-lockdown amounts.

Only the non-lockdown amounts are remitted by the placing the company into VA, liquidation or SBR within the 21 days. The lockdown amounts will not be remitted by the appointments noted above.

If the director penalty remains unsatisfied, the ATO may seek to recover the debt from the director or former director of the company. These recovery attempts may also include seeking to have the director declared bankrupt by way of a creditor’s petition.

If you have received a director penalty notice, we have the knowledge and experience to assist implementing the strategies to deal with the DPN. Please call on (02) 4708 0343 for an obligation free initial consultation. This initial consultation is free of charge.

Having Insolvency Concerns?

Please contact KHR Insolvency for an obligation free consultation to discuss your circumstances.