When tax debts become personal liability
A Director Penalty Notice from the ATO can make you personally liable for your company's outstanding PAYG and superannuation. The type of DPN received determines your options, and the 21-day window is critical.
Act immediately
Upon receiving a Director Penalty Notice, contact DV Recovery Management without delay. The options available to you narrow significantly after 21 days.
A Director may be personally liable for outstanding employee PAYG withholding and superannuation when the ATO issues a Director Penalty Notice.
Whether this liability can remain at company level, and be resolved through company administration or liquidation without affecting the director personally, depends on the type of DPN received.
Non-Lockdown DPN
If the company submitted its BAS and SGC statements before the stipulated date but failed to pay the outstanding amount, the DPN received is a Non-Lockdown DPN. In this case, directors can be absolved of personal liability by implementing one of the following four options within 21 days of receiving the DPN:
- Pay off the debt in full
- Place the company into Voluntary Administration
- Allow the company to enter Creditors' Voluntary Liquidation
- Have the company enter Small Business Restructuring
Acting within this 21-day window keeps the debt at company level. Miss the window, and the personal liability locks in regardless of what happens to the company.
Lockdown DPN
If the company failed to submit its BAS and SGC statements by the stipulated date and failed to pay the outstanding amounts, the DPN received is a Lockdown DPN. This is the more serious outcome: the debt becomes the director's personal debt. Even if the company is subsequently liquidated, the director remains personally liable and must repay the amount personally.
A Lockdown DPN cannot be resolved simply by placing the company into administration. The director's options are more limited and professional advice should be sought immediately.
What to do when you receive a DPN
The single most important step is to get advice before the 21-day period expires. The appropriate response depends on which type of DPN you have received, the company's current financial position, and whether the company is worth saving.
DV Recovery Management can review your DPN, identify your options, and move quickly to implement the right solution. Contact us as soon as the notice arrives. Do not wait.
Received a Director Penalty Notice?
The 21-day window closes fast. Call us today for a free initial meeting. We will review your DPN and set out your options in plain English.