Paying the debt in full seems like the obvious way of complying with a Director Penalty Notice – but even this has risks attached.
If you pay the tax debt pursuant to a DPN and your company is later placed into liquidation, the Liquidator will, as part of the normal liquidation process, scrutinise all payments made to creditors in the six-month period before liquidation. As a consequence, he may attempt to claw back unfair preferential payments.
Payments made by a company following the receipt of a Director Penalty Notice may be considered preferential, and are able to be clawed back by Liquidators.
If the Liquidator takes action to recover such payments, the ATO can and will seek the reimbursement of any money given up to the Liquidator from you personally.
This Means Your Personal Assets are at Risk
It’s therefore essential that before any payments are made under a Director Penalty Notice, you’re highly confident that the company will remain solvent for the foreseeable future.
Always seek expert Insolvency advice when faced with a Director Penalty Notice.