By Tina Zawila
Recently I have been warning readers that the Australian Taxation Office has been ramping up its debt-collection activities. In this article I want to highlight one of the tools the ATO has in its arsenal to take action against taxpayers who have outstanding taxation liabilities, called the Director Penalty Notice (DPN).
By way of background, in November 2021 the Treasury noted that there were over 2.7million Australian Directors of companies. Many of these are directors of small proprietary companies (small business owners). Think of your Mum and Dad size small business owners who operate their business through a company structure. Often these directors are naïve to their responsibilities and obligations as a company director, and I would urge them to seek advice and educate themselves on their role and responsibilities, in particular their financial obligations for unpaid tax or superannuation.
Now, let’s discuss DPN’s. A DPN is a Notice that the ATO can send a director that can make the director personally liable for three types of tax debts of a company – Pay As You Go (PAYG), Superannuation Guarantee Charge (SGC) liabilities and Goods and Services Tax (GST).
Once a DPN is issued, the ATO can pursue either the company or the directors for the amount of the debt (called parallel liability). The Directors have 21 days from the date of issue to either:
Pay the amounts in full (using either company funds or personal funds).
Negotiate a payment plan with the ATO (although the ATO can still offset your personal tax refunds against the debt).
If neither of the above happens, the ATO may re-commence action against you to recover the debt. This means that your personal assets are exposed.
Indications are that the ATO will issue 30,000 DPNs in 2024! And their focus is on unpaid employee entitlements (tax and super).
To avoid this happening to you, ensure that the company lodges their tax compliance documents on time (even if you cannot pay in full), take action and don’t delay in requesting a payment plan with the ATO for any unpaid debts, and keep your director addresses up to date with the ATO and the Australian Securities Investment Commission. Often, directors are unaware of a DPN because it has been sent to an old address and the 21 days starts from date of issue (not date of receipt). It’s important to note here that the ATO does not advise your Tax Agent when a DPN issues, it is sent direct to your address on file.
Don’t let this happen to you, make sure you fully understand your responsibilities and obligations as a past, present or future company director.
If you need further information or help with actioning a current DPN please contact the professional team at UHY Haines Norton CQ on 07 4972 1300.