Written by The ATO has been collecting overdue tax payments, including by serving Director Penalty Notices (DPNs) which were largely held in abeyance during the pandemic. A DPN is a notice to a director of a company which makes directors personally responsible for certain kinds of tax obligations of a company.
Division 269 of the Taxation Administration Act 1953 (Cth) imposes on directors liabilities to cause the company to comply with its obligations from the initial day on which a tax obligation accrues, and if the company fails to comply with its obligation by the end of the payment period, a penalty becomes due and payable by the director equal to the amount of the company’s obligation. Some of the obligations include Pay As You Go (PAYG) amounts and Superannuation Guarantee Charge (SGC) and Goods and Services Tax (GST).
The issuing of a DPN is a procedural step required by the ATO before it can commence proceeding against a director to recover accrued penalties.
Defences to avoid liability for failing to comply with a DPM include illness, which prevented the director to manage the company when it failed to comply with its SGC and PAYG obligations, or that the director took ‘all reasonable steps’ to ensure that the company complied with its obligations, but there were no reasonable steps that could have been taken to ensure that the company complied with its obligations, an administrator was appointed to the company, a small business restructuring practitioner was appointed, or the company was wound up.
Any director who receives a DPN should immediately seek legal advice as the DPN carries time-critical consequences.