Understanding Director Penalty Notices (DPNs)

The Australian Taxation Office (ATO) often uses Director Penalty Notices (DPNs) as a tool to recover unpaid debts. Understanding DPNs and managing them effectively can protect your clients from significant financial risks.

What are Director Penalty Notices (DPNs)?

A Director Penalty Notice (DPN) is issued by the ATO to hold company directors personally liable for their company’s unpaid Pay As You Go (PAYG) withholding and Superannuation Guarantee Charge (SGC) amounts under specific circumstances. There are two types of DPNs:

• Non-Lockdown DPNs: Directors can remit the penalty by ensuring their company pays the ATO debt, appointing an administrator, a small business restructuring practitioner, or beginning liquidation within 21 days of the notice’s issue date.
• Lockdown DPNs: Directors are automatically held personally liable if the company has not reported its PAYG withholding or SGC obligations within the required timeframe, regardless of any further action taken.

Key Tips to Avoid Lockdown DPNs and Personal Liability

1. Lodge on Time (Even if You Can’t Pay): Ensure your clients lodge their Business Activity Statements (BAS), Instalment Activity Statements (IAS), and SGC statements on time to avoid Lockdown DPNs, even if they cannot pay immediately.
2. Keep Addresses Up to Date: Advise your clients to keep their personal address on the ASIC company register current to receive DPNs promptly. DPNs do not go to a company’s registered office or their accountant.
3. Act Quickly: Ordinary DPNs give directors 21 days from the issue date to take action. Due to postal delays, your clients may have as little as 14 days to respond. Encourage them to act quickly.
4. Manage Tax Debts Proactively: Encourage your clients to address significant tax debts before ASIC strikes off their company, which could lead to potential DPNs.

How Boss Lawyers Can Support You and Your Clients

If your clients are struggling with ATO debt obligations or receive a DPN, we offer several tailored solutions:

• ATO Debt Negotiations: We assist in negotiating repayment arrangements with the ATO.
• Small Business Restructure (SBR): A flexible, cost-effective way to manage tax debts and continue trading. Recent deals have seen ATO debt compromised to 20 cents in the dollar with a freeze on accruing interest.
• Voluntary Administration: Helps resolve complex financial difficulties, potentially involving restructuring, asset sales, or a deed of company arrangement (DOCA).
• Liquidation: The last resort, providing a clear and structured way to handle a company’s debts and liabilities.
• Personal Insolvency: We have extensive experience with various personal insolvency options, including Debt Agreements, Personal Insolvency Agreements, and Bankruptcy.

We understand the challenges directors face with ATO debts and other financial pressures. The earlier we are involved, the better the opportunity to restructure a business successfully. The ATO is currently showing significant support for Small Business Restructures – so these are worth discussing.

Feel free to reach out for a quick chat about how we can help you and your clients navigate these challenges. It costs nothing to pick up the phone.