Director Penalty Notices
Have you received a Director Penalty Notice (DPN)?
The Australian Taxation Office (ATO) has the authority to issue a Director Penalty Notice (DPN) to recover a company’s overdue PAYG tax, GST, and superannuation from its directors.
Due to the severe potential ramifications of a DPN, immediate action is highly recommended.
Being proactive and informed can significantly mitigate risks and outcomes.
What to do when you receive a DPN?
If you find yourself liable under a Director Penalty Notice, the following steps may help manage the situation:
- Obtain prompt professional advice.
- Enter into a personal payment agreement with the ATO for settling the director penalty debt, as these arrangements have been successfully negotiated by our service with many directors.
- If there are multiple directors, consider requesting shared contributions to satisfy the ATO liabilities.
- Explore the possibility of arranging a Personal Insolvency Agreement, and if no solutions suffice, consider filing for bankruptcy as a last resort.
What happens if I don’t comply?
When you are deemed liable under a DPN, the debt is essentially treated as a regular tax obligation by the ATO. This means the ATO may:- Initiate legal proceedings to secure a judgment for the unpaid amounts;
- Use the judgment to issue a bankruptcy notice against you; or
- Garnish funds directly from your bank account or wage.
The ATO often targets recovery actions toward the director assessed as having the best financial capacity to repay the debt.
Implications for Old and New Directors
The ATO can issue DPNs to directors who were serving at the time the debts were incurred, even if they have since resigned. New directors are also liable once they have been in office for over 30 days, but they will not immediately receive a notice until after this period.
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