Where all lodgements are up to date a Director Penalty Notice is issued by the ATO and sent to any or all company directors.
Where all tax lodgements are up to date, the Director Penalty Notice allows a 21 day grace period for the directors to undertake one of four choices to deal with the outstanding tax debt.
If directors do not comply with the DPN within the 21 day grace period, they will be personally liable for the unpaid PAYG and superannuation tax debt of the company. No extensions, no excuses. The choices are:
- Pay the debt in full
- Pay the debt in instalments
- Appoint a Voluntary Administrator
- Appoint a Liquidator
Where lodgements have not been kept up to date and are more than 3 months overdue.
If a company has not lodged all its tax returns within 3 months of the due date – the directors will be automatically personally liable for a penalty equal to the unpaid PAYG and superannuation debt of the company.
If the ATO does issue a Director Penalty Notice in circumstances where there are outstanding lodgements 3 months past the due date, a director will not receive the usual 21 day grace period in which to comply and will instead become immediately personally liable for the debt listed in the notice. As such, the director will not be able to avoid personal liability for the unpaid PAYG or superannuation tax debt where lodgements are more than 3 months overdue, regardless of whether the company is placed into liquidation or administration.
The Insolvency Experts have seen cases where the ATO has issued a DPN even after the company has been placed into liquidation. This means you will lose personal assets to pay a company tax debt. And just because you haven’t lodged your returns don’t think the ATO cannot act.
The ATO, in the absence of lodged returns, can issue an estimate of what they believe may be the outstanding debt and then issue a DPN on the basis of that estimate. Accordingly, if you have outstanding returns more than 3 months overdue, and you believe your business is viable, act immediately to bring all lodgements up to date (although this does not relieve a director of personal liability for director penalties).
Alternatively, if your business is not viable and you cannot bring lodgements up to date, you must consider liquidating the company immediately. The new laws require the ATO issue a Director Penalty Notice before it can recover director penalties for unpaid PAYG or Superannuation Guarantee. Therefore, if you have a tax debt, and believe the ATO may be about to issue a DPN, call The Insolvency Experts immediately and without delay on 1300 767 525.
YOU MUST ALWAYS LODGE ALL RETURNS WITHIN 3 MONTHS OF THE DUE DATE OR YOU CANNOT ESCAPE PERSONAL LIABILITY FOR COMPANY TAX DEBTS WHERE A DIRECTOR PENALTY NOTICE HAS BEEN ISSUED!