By Drazen Kozaric, Special Counsel
In late 2022, after two years of inactivity, the Australian Tax Office (ATO) started issuing 100 director penalty notices (DPNs) a day. A Director Penalty Notice (DPN) is a Notice that the ATO can send to a director if the company fails to lodge its business activity statement (BAS), instalment activity statement (IAS) or superannuation guarantee charge statement (SGC), or if it fails to pay its PAYG, GST or supper guarantee contributions by the due date.
The ATO will use the director’s address registered with ASIC or the director’s last known address to the ATO to issue the DPN. The date the DPN is posted by the ATO to a director or left at the address registered with ASIC is the date of the notice.
The ATO can recover the amounts of the director penalty by:
- issuing garnishee notices;
- offsetting any of the director’s tax credits against the director penalties; or
- initiating legal recovery proceedings against the director to recover the director penalty.
There are two types of DPNs:
- Traditional non-lockdown DPN, which gives directors 21 days to act; and
- Lockdown DPN.
Non-lockdown DPN is issued to a company director that has lodged the company’s statements within three months of the due date, or in the case of a new director, within three months of the date of the new director’s appointment, but failed to pay PAYG, GST or SGC. The director has 21 days from the date of the notice to either pay the debt, place the company into voluntary liquidation or administration, or come to a payment arrangement with the ATO. If the director fails to do either, he or she will become personally liable for the debt.
Lockdown DPNs is issued to a company director that has not lodged the company’s statements within three months of the due date or in the case of a new director, within three months of the date of the new director’s appointment. The director in this instance can only remit the debt by paying it in full.
To avoid the personal liability directors should lodge their companies ‘statements and pay their PAYG, GST and SGC debts on time. If they cannot pay the debts by the due date, they should lodge the returns anyway to avoid being served with a lockdown DPN.