The first piece of advice is do not ignore it.
A DPN is issued by the ATO to a director of a company under the provisions of Division 269 of Schedule 1 of the Taxation Administration Act 1953 (Cth) and can make directors personally liable for certain tax debts of the company.
You have very little time (within 21 days from when the ATO posted the DPN), to deal with the DPN before it permanently locks down to make you as the director permanently liable for the company’s debt. We are experienced in assisting our clients following their receipt of a DPN.
Contact us before it is too late. Click below to book a complimentary 30-minute on-line meeting with one of our senior lawyers to discuss your options upon receipt of a DPN. But don’t leave this to the last minute because your options rapidly diminish the longer you leave seeking professional advice.
Detailed advice regarding Director Penalty Notices
DPNs make directors personally liable for certain tax debts of a company, namely:
- PAYG withholding;
- GST;
- Mandatory superannuation contributions;
- Luxury Car Tax; and
- Wine Equalisation Tax.
There are two types of DPNs – Non-Lockdown and Lockdown DPNs
1. Non-Lockdown DPN
This penalty notice is issued to the company that hasn’t paid its tax liabilities but reported its BAS within three months of the deadline or fails to report its Superannuation Guarantee Charge (SGC) by the due date to the ATO. In the non-lockdown DPN case, the director of the company might be able to avoid being personally liable if the company:
- Puts itself into liquidation;
- Appoints a Small Business Restructuring Practitioner;
- Appoints a voluntary administrator; or
- Negotiates arrangement to make the payment or pays off the debt
This must be done within 21 days of the ATO POSTING the DPN.
2. Lockdown DPN
In the case of receipt of a lockdown DPN, the directors do not have the option to have their personal liability remitted by appointment of a Small Business Restructuring Practitioner, Liquidator or Voluntary Administrator, their only option is to pay the outstanding debt.
Lockdown DPNs arise when a company fails to lodge its BAS (GST and PAYG liability) within 3 months of the date due for lodgement or fails to report its SGC statement by the date due. The directors in this lockdown case become automatically liable for the unpaid amounts due to the ATO. This could result in the director becoming declared bankrupt.
There are some very limited legal defences for the ATO’s application of lockdown DPNs. Talk to the Apres Legal team about the options which may be available to you if you receive a lockdown DPN.
Beware
Receiving a DPN may have some serious financial consequences for you as a director. If your business is struggling financially, what may appear to be a quick solution to remove the immediate DPN issue and to pay off the ATO debt by injecting personal funds into the struggling company to pay the ATO may have adverse consequences. In the event the company later proves insolvent you may end up paying the ATO debt twice. The ATO may be required to refund the tax paid as a preference payment pursuant to section 588FA of the Corporations Act 2001 (Cth)(Act). If the ATO is forced to refund the tax paid by the company the ATO has powers under section 588FGA of the Act to seek an indemnity from the directors for the sum paid back by it as an unfair preference. i.e. you pay twice.
Take aways
- Keep your BAS and SGT reporting up to date, even if the company can’t afford at the time to make the necessary payments.
- If you receive a DPN act promptly to seek both legal and financial advice.
- Don’t make quick and uninformed decisions as to what you think may be the best way of solving the DPN issue.
If you need legal advice following the receipt of a DPN then call our firm Apres Legal – Commercial Lawyers on 03 8567 7541, or email [email protected], or book a complimentary on-line 30 minute consultation with one of our senior lawyers.
Disclaimer: This article is not legal advice and should not be relied upon as legal advice. All articles from Apres Legal are intended to provide general information. Legislation and case law may have been simplified and/or paraphrased. If you would like legal advice based on your current circumstances, you should contact Apres Legal.