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The ATO is ramping up its issuing of director penalty notices

In late 2023 and in 2024, we are seeing a significant shift in the ATO’s debt recovery approach, in particular regarding the issuing of director penalty notices (DPNs). It’s safe to say, the era of the ATO taking a more conservative approach to debt recovery during COVID is over!

What is a director penalty notice?

When a company has an outstanding tax debt relating to superannuation guarantee, PAYGW and/or GST, the ATO can recover the debt by issuing a director of the company with a DPN.  When the ATO issues a director with a DPN, the director becomes personally liable for the tax debt.

The DPN is issued to the director’s ASIC registered address by normal postal mail. The DPN is deemed to have been served on the date it is issued by the ATO.

There are two types of DPNs that can be issued to a director.  A non-lockdown DPN and a lockdown DPN. 

What is a non-lockdown DPN?

A non-lockdown DPN is a director penalty notice that is issued by the ATO to a director of the company for unpaid GST, PAYGW and superannuation guarantee in the following circumstances:

  • In relation to GST and PAYGW, the company has lodged its BAS disclosing the liabilities within three months of the BAS due date; and
  • In relation to superannuation guarantee, the company has lodged Superannuation Charge Statements disclosing the liabilities within one month of the ordinary due date for payment of superannuation guarantee.

Importantly, where the ATO issues a non-lockdown DPN to a director, the director can avoid becoming personally liable for the unpaid tax debts of the company by placing the company into voluntary liquidation within 21 days of the date of the DPN.

What is a lockdown DPN?

In comparison to a non-lockdown DPN, a lockdown DPN is a director penalty notice issued by the ATO to a director of the company for unpaid GST, PAYGW and superannuation guarantee in circumstances where the company has not previously lodged its BAS or Superannuation Guarantee Charge Statements disclosing the tax debts by the above due dates.

Where the ATO issues a lockdown DPN to a director, he or she cannot avoid becoming personally liable for the unpaid debts of the company by placing the company into voluntary liquidation.

What should you do to do avoid a DPN?

  • Even if a company is having trouble with its ATO obligations, it is important that the company continue to lodge BAS and Superannuation Guarantee Charge Statements by their due dates 
  • Even if a company is having trouble with its ATO obligations, it should continue to communicate with the ATO and arrange a suitable payment arrangement
  • If you are served with a DPN, immediately identify whether the DPN is a non-lockdown DPN or a lockdown DPN and take action immediately
  • If the DPN is a lockdown DPN, consider entering a payment arrangement with the ATO for the amount owed

Contact us

We have experienced Tax Advisors and Accountants who can advise you on how to avoid a director penalty notice, and what to do if you get a DPN.

Contact your BG Private advisor, or contact our Tax Advisory Partner, Tim Olynyk on +61 3 9810 0700 or and we can help.

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