The most dreaded weapon in the arsenal of the Australian Taxation Office (ATO) is the “Director Penalty Notice” (DPN) and its powers are being broadened and expanded to increase the liabilities for all directors.
A DPN is a notice that the ATO can send to a director or directors which will make that director(s) personally liable for the unpaid PAYG Withholding and the Superannuation Guarantee Charge (SGC) liabilities. A company director becomes liable to a penalty at the end of the day the company is due to meet its obligation, at this time the penalty is created automatically, however, the ATO cannot commence any recovery for these liabilities until 21 days after a penalty notice is issued to a director.
There are two types of DPNs:
- 21 Day DPN – 21 day DPNs are issued to company directors who have lodged BAS, IAS and SGC statements within three months of the due date for lodgement, but the debt remains unpaid. If the company has all the lodgements completed on time, the issuing of a DPN allows the directors 21 days to make payments, appoint an administrator or begin winding up the company, which results in the penalty being remitted.
- Lockdown DPN – a lockdown DPN is issued where a company has failed to lodge its BAS, IAS or SGC Statements within the three months’ time frame. If this occurs, the penalty permanently remains with the director and there is no ability to remit the penalty within 21 days.
Lodgements Should Be Made on Time.
All companies need to ensure all their lodgements occur on time. The use of a tax agent allows for an additional period of time of four weeks, for some lodgements, which gives business owners an extra reason to engage the services of a tax agent and assist with meeting your obligations. The simple fact is, the DPN regime punishes those who are unorganised and do not meet lodgement requirements.
Further Changes Proposed
The changes announced in the 2018/19 Federal Budget included that the government is proposing to also include the GST as an additional liability that directors will incur in the DPN regime. This is not law as yet but will change in the future.
If we can help you get organised and stay on top of your obligations as a director, please call us on 02-4365 6789.