It has been reported that this week, the ATO has sent around 50,000 letters to directors of companies with outstanding tax debts warning the directors to take action in relation to the debts or face the risk of personal enforcement action (including being issued with Director Penalty Notices (DPN’s)).
As a reminder, a DPN makes a director of a company personally liable for the following types of tax debt in a company:
- PAYG withholding
- Superannuation guarantee; and
A DPN issued to a director can be issued as a “lockdown DPN” or a “non-lockdown DPN”.
The type of DPN issued is extremely important.
A lockdown DPN can be issued by the ATO where a company has not reported its unpaid PAYG withholding, superannuation guarantee and/or GST to the ATO within the following prescribed time periods:
|Tax||Due date for reporting liability|
|Superannuation Guarantee||28 November (September quarter)
28 February (December quarter)
28 May (March quarter)
28 August (June quarter)
|PAYG withholding||Within 3 months from reporting due date|
|GST||Within 3 months from BAS reporting due date|
A non-lockdown DPN can be issued by the ATO where the company has reported its PAYG withholding, superannuation guarantee and GST liabilities within the above due dates but has nevertheless not paid the outstanding liabilities it has reported as owing.
The key difference between a lockdown DPN and a non-lockdown DPN is that with a lockdown DPN, the directors cannot avoid personal liability under the DPN by putting the company into liquidation within 21 days of when the DPN is served on them. Effectively, where a lockdown DPN is issued by the ATO, the director is required to ensure that either the company or themselves pay the outstanding amounts owing to avoid the ATO enforcing recovery action against them personally.
In contrast, where a non-lockdown DPN is issued to a director, the director can avoid personal liability by placing the company into liquidation within 21 days of the date of issue of the DPN.
If you are issued with a DPN or have any further questions, please contact your client service contact at Banks Group.