February 19, 2014

ATO Compliance Notices – Directors Penalty Notice (DPN)

In July 2012, changes were made to the Directors Penalty Notice regime, which have increased the liability of Companies and personal exposure of their directors.  These changes were introduced to  ensure that Companies are compliant with the reporting and remittance of their PAYG and Superannuation obligations. The ATO signalled that it is no longer prepared to support struggling businesses through financing business operations via unpaid tax and superannuation obligations.
In recent months, there has been an increase in activity by the ATO against organisations who are behind in the lodgement of their business activity statements and returns. This recent crackdown means that many Companies and their directors face the possibility of prosecution or fines if they do not comply to their statutory obligations. 

Consequences for not lodging activity statements and returns

If your clients are late in lodging their returns or activity statements, they will incur penalties and be charged interest* on any unpaid amounts.

Once a Company has received an ATO compliance notice and still fail to lodge their returns, they could face the following repercussions:

  • An audit and face further investigation from the ATO
  • The ATO may estimate their net assessable amount or taxable income, and the tax they owe without further warning
  • A business or individual could be referred for prosecution without further warning
  • If prosecuted and convicted, an individual could be fined up to $8,500 or imprisoned for up to 12 months, for a company, the maximum fine is $42,500.

Advice for your clients

Your clients should:

  • Ensure any outstanding BAS and PAYG returns are lodged as soon as possible
  • Pay all PAYG and superannuation charge amounts within the relevant time frames
  • Keep all BAS and PAYG returns up to date and lodged within 3 months of the due date.

If a BAS return is lodged but PAYG is not paid, the ATO is required to issue a Director Penalty Notice. At the expiry of the 21 day notice period, personal liability can apply. Directors’ personal liability for a company’s unpaid PAYG will be avoided if a company enters into Voluntary Administration, or has a Liquidator appointed before the expiry of the Director Penalty Notice. If unpaid PAYG is not reported within 3 months of the due date, the Director will automatically be personally liable for any unpaid amounts, even if the company is placed into voluntary administration or liquidation after this date.

If any of your clients have overdue BAS and / or PAYG returns and / or overdue PAYG and superannuation charge payments, contact SV Partners on 1800 246 801 for specialist advice on the options available to deal with issues arising from this legislation. 

*The interest rate is subject to changes based upon current interest rate variations. Please contact the ATO for further information.


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