In line with the newly expanded Director Penalty Regime, the ATO has sent letters to thousands of company directors warning that any company taxation debts may be reported to the credit reporting bureau.
From 1 April 2020, the DPN regime was expanded to include GST, Wine Equalisation Tax (WET) and Luxury Car Tax (LCT). While the ATO has had the ability to issue Director Penalty Notices (DPNs) since this time, very few have been issued to date.
DPNs for superannuation came into effect on 1 April 2019 and in order for a director to achieve remission of any penalty under a potential DPN, superannuation must have been reported by the due date (i.e. within 28 days of the end of each quarter).
By issuing these warnings, the ATO has made it clear that it is now refocusing its collection efforts on company debt. When the ATO does start issuing DPNs, the penalty will likely be significantly higher than under the old regime.
So, what happens if you receive a penalty notice?
If the ATO debts have been reported within the prescribed time frames (being within three months of the due date for PAYG, GST, LST and WET and by the due date for superannuation), then the director has the opportunity to remit their penalty by paying the debt or by placing the company into voluntary administration, liquidation or appointing a Small Business Restructuring Practitioner (SBRP) within 21 days of the date of the notice.
If the DPN has been reported outside of the prescribed time frames, then the penalty is a “lockdown” penalty and the director can
only avoid the personal liability by having the company pay the outstanding amounts in full.
If a director has received a warning that they may receive a DPN they should take the warning very seriously and put steps into place to deal with any penalty they might receive in the future.
Please note: Directors should check to ensure that their address details are up to date with ASIC as DPNs are sent to the director's residential address.
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