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Now that things seem to be getting back to some variation of normal, our Insolvency team has been eagerly waiting to see when the ATO will commence enforcing outstanding tax liabilities – and rumour has it that the time has come. If a Director has outstanding tax liabilities or receives a Director Penalty Notice (DPN), they need to ensure they receive the correct advice before proceeding.

what is a DPN?

The ATO can issue one of two types of DPN to make a Director personally liable for a penalty equal to the value of a company’s overdue SGC, PAYG, and GST.

There are two types of DPNs that can be issued:

  • non-lockdown DPNs are issued when statements are lodged (within three months of the due date) but debts aren’t paid; and
  • lockdown DPNs are issued where statements have not been lodged (within three months of the due date) and debts are unpaid.

There has been a major change to DPNs that has come about as a result of the recent Federal Circuit and Family Court of Australia decision in Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5. This decision found that entering into a payment arrangement does not cause a tax debt which is due and payable to cease to be due and payable. This negatively impacts the non-lockdown DPN options to remit personal liability.

what happens if I am served a DPN?

Once served with a non-lockdown DPN notice, a Director has 21 days from the date of the DPN to exercise one of the following four options to avoid personal liability.

A Director can either:

  1. pay the liability in full;
  2. put the company into administration;
  3. appoint a Small Business Restructuring Practitioner (SBRP); or
  4. put the company into liquidation.

DPNs are sent in the mail. For those of you who are directors, do you know your addresses with ASIC? Make sure you update them so that you don’t miss a DPN in the mail.

If you have outstanding tax liabilities or have been served with a Director Penalty Notice, our team is here to help you respond to the ATO and provide advice on the best option to consider for the benefit of the company and to avoid personal liability.

stay up to date with our news & insights

directors beware: major change made to director penalty notices

20 April 2022
prue greenfield

Now that things seem to be getting back to some variation of normal, our Insolvency team has been eagerly waiting to see when the ATO will commence enforcing outstanding tax liabilities – and rumour has it that the time has come. If a Director has outstanding tax liabilities or receives a Director Penalty Notice (DPN), they need to ensure they receive the correct advice before proceeding.

what is a DPN?

The ATO can issue one of two types of DPN to make a Director personally liable for a penalty equal to the value of a company’s overdue SGC, PAYG, and GST.

There are two types of DPNs that can be issued:

  • non-lockdown DPNs are issued when statements are lodged (within three months of the due date) but debts aren’t paid; and
  • lockdown DPNs are issued where statements have not been lodged (within three months of the due date) and debts are unpaid.

There has been a major change to DPNs that has come about as a result of the recent Federal Circuit and Family Court of Australia decision in Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5. This decision found that entering into a payment arrangement does not cause a tax debt which is due and payable to cease to be due and payable. This negatively impacts the non-lockdown DPN options to remit personal liability.

what happens if I am served a DPN?

Once served with a non-lockdown DPN notice, a Director has 21 days from the date of the DPN to exercise one of the following four options to avoid personal liability.

A Director can either:

  1. pay the liability in full;
  2. put the company into administration;
  3. appoint a Small Business Restructuring Practitioner (SBRP); or
  4. put the company into liquidation.

DPNs are sent in the mail. For those of you who are directors, do you know your addresses with ASIC? Make sure you update them so that you don’t miss a DPN in the mail.

If you have outstanding tax liabilities or have been served with a Director Penalty Notice, our team is here to help you respond to the ATO and provide advice on the best option to consider for the benefit of the company and to avoid personal liability.