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The Australian Tax Office (ATO) granted nearly 13 million lodgement and payment extensions due to the COVID-19 pandemic and a series of natural disasters. It has now resumed debt collection activities, sending thousands of notices to Directors.

Director Penalty Notices

A company director has a legal obligation to ensure that the company’s corporate governance obligations are met. A director penalty notice (DPN) is a notice sent by the ATO to a company director if the company fails to comply. A director is personally liable for the unpaid balance.

Liabilities

A company with employees is liable for PAYG and superannuation guarantee obligations, amongst other liabilities.

If an employer is unable to pay the superannuation guarantee on time, they may be required to pay the Superannuation Guarantee contributions (SGC). The SGC is made up of any shortfall in superannuation guarantee amounts and interest and administration fees.

Furthermore, if a company fails to meet their requirements, resulting in unpaid amounts, the ATO will seek to collect these amounts from the company. It may also issue a penalty notice to the director.

Types of notices

The ATO must first issue a DPN before recovering any director penalties.

DPNs are classified into two types; the first is a standard notice, warning the director. The director then has 21 days to take action in order to avoid liability. An automatic personal liability notice is the second type of notice, a lockdown penalty notice. It takes effect the moment the ATO serves it on the director.

What if you can’t pay?

Working with the ATO to manage debt is critical for businesses with debts over $100,000. According to a bill amendment passed in 2019, the ATO now has the authority to report tax debt to credit reporting agencies, which can significantly affect businesses’ future operations.

If the company owes less than $100,000, it can set up a payment plan that allows payment by instalments. It must file activity statements and tax returns on time, even if it is unable to pay by the due date.

How we can help

As your registered agent, TaxAssist Accountants can enter a payment plan on your behalf.

If you need more information on the services we provide, why not set up a free initial consultation with one of our accountants. We’d be glad to discuss all of your individual and business needs.

Date published 25 Apr 2022

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