What Is a Director Penalty Notice (DPN)?
A Director Penalty Notice (DPN) is a notice issued by the ATO making a company director personally liable for the unpaid amounts of:
· Pay As You Go Withholding (PAYGW)
· Goods and Services Tax (GST)
· Super Guarantee Charge (SGC)
Company directors are personally liable for these debts if they are not paid by the due date. In effect, a DPN is an official notice that the ATO is taking steps to recover these debts from the director(s).
MUST ACT QUICKLY
Directors have 21 days to respond to the DPN, calculated from the date that the notice was posted (the issue date of the notice). Postal time means that a director has less than 21 days to both obtain advice on strategy and, where appropriate, implement the next step.
Issuing a DPN is the first step when the ATO intends to recover unpaid company taxes from its directors. Once the DPN is issued, the ATO can recover the amount by:
Issuing a garnishee notice
Offsetting your tax credits against the director penalties
Initiating legal proceedings
NON LOCKDOWN DPNS & LOCKDOWN DPNS
NON-LOCKDOWN DPNS apply where the lodgments have been submitted within the relevant timeframe, but the tax has not been paid. Under ‘non-lockdown’ DPNs, the director has 21 days to take certain steps (see below), otherwise they will remain personally liable for the tax debt.
The relevant timeframes are:
For non-lockdown DPNs, directors can remove personal liability for the debts by taking one of the following steps within the 21-day period:
have the company pay the debt;
appoint a voluntary administrator;
appoint a small business restructuring practitioner; or
appoint a liquidator.
Importantly, entering an ATO payment arrangement within the 21-day period will not remove the director’s personal liability for the debt. Once the 21-day period lapses (generally, during the payment plan), personal liability will remain and then likely be acted upon by the ATO if the payment plan defaults.
Lockdown DPN
A lockdown DPN can be issued where a company has not lodged its Business Activity Statements (BAS), Instalment Activity Statements (IAS), and/or SGC statements within 3 months of their due date.
If a director received a lockdown DPN, the only way to avoid personal liability is to immediately use the company to repay the full amount of the debt. If the company is unable to pay the debt, the director immediately becomes personally liable, and may need to declare bankruptcy to repay the amount.
If you have received a DPN and need support, contact us today to discuss with the external specialist team we work alongside to work through a resolution.
To support in avoiding the risk of DPN and ensure lodgements & payments for BAS & super are made on our time, our Bookkeeping team are here and ready to help you stay on top of these in the future. Email hello@fenwickcollective.com.au to discuss a quote and consultation to run through!