It has come to our attention that the ATO is warning tens of thousands of directors to take action on company tax debts or face the risk of full enforcement action.
Who is at risk and what is the potential risk?
Company directors that have not actively manage their tax affairs could receive a Director Penalty Notice (DPN) from the ATO which result in a director being personally liable for their company’s tax debt.
Director Penalty Notice (DPN):
Types of ATO issues and its consequences:
There are two types the ATO issues:
Non-lockdown DPN—issued when statements are lodged (within three months of the due date) but debts are unpaid.
Lockdown DPN—issued where statements have not been lodged (within three months of the due date) and debts are unpaid.
Non-lockdown DPN options
To remit the penalty issued under a non-lockdown DPN, directors (joint and severally) must consider the following to avoid their personal liability the amount nominated on the notice:
To place the company into liquidation.
To place the company into administration.
To appoint a small business restructuring practitioner and commence the small business restructuring process.
For the company to pay its debt obligations to the ATO in full.
Note: Entering into a payment arrangement does not cause a tax debt which is due and payable to cease to be due and payable. This negatively impacts the non-lockdown DPN options to remit personal liability.
Lockdown DPN options
Directors can only remit this liability by paying the amount in full.
Which debts are captured under the DPN regime?
For tax periods from 1 April 2020 onwards, personal liability is captured for:
pay as you go (PAYG) withholding and superannuation
goods and services tax (GST)
wine equalisation tax (WET)
luxury car tax (LCT)
Notice period
Directors have to respond within 21 days from the date of notice regardless the date of receipt.
If you haven't lodge your return or BAS for a while, please contact us ASAP!