Director Responsibilities
Company Directors are legally responsible for ensuring that a company’s tax and superannuation obligations are reported and paid on time. Most of our readers would be aware of the director penalty regime, and how the ATO can utilise these legislative provisions to force the Director(s) of a company to personally pay outstanding:
Pay As You Go Withholding (PAYGW) Goods and Services Tax (GST) Superannuation Guarantee Charge (SGC).
A Director becomes liable to a penalty at the end of the day on which the company is due to meet its obligation. At this time, the penalty is created automatically. The ATO does not need to issue any notices or take any action to create the penalty.
However, the Commissioner of Taxation (or the appropriate Delegate of the Commissioner), must not commence proceedings to recover a director penalty until 21 days after a Director Penalty Notice (“DPN”) is issued to a Director.
Even if you resign as a Director of the Company, you can be liable for director penalties for liabilities of the Company. Similarly, if you are appointed as a new company Director, you can become personally liable for any unpaid amounts.
Lockdown DPN
A lockdown DPN can be issued to a Director of a company if the company fails to lodge its BAS, IAS, and/or SGC statements within three months of their due date for lodgement.
In this case, the penalty is permanently imposed on the Director, and there is no ability to remit the penalty (i.e., avoid personal liability) except by paying the debt in full.
Recent ATO Actions
It has been reported that the ATO intends to utilise the DPN regime more often in 2024 as the ATO ramps up its actions to recover $30 billion in overdue small business tax.
We have recently become aware that the ATO can (and will) issue lockdown DPN’s on company Directors even after the Director has,
- Placed the Company into Liquidation
- Appointed a Voluntary Administrator over the Company
- Appointed a Small Business Restructuring Practitioner over the Company
We have seen instances where the ATO has issued lockdown DPN’s on company Directors where the Directors have placed the Company in Voluntary Administration, and Creditors (particularly where the ATO was the only major creditor) have subsequently resolved to accept the Directors’ proposal for a Deed of Company Arrangement (DOCA).
Importance of Compliance
Many company Directors and professional advisors are not aware of the difference between a standard DPN (i.e. non-lockdown DPN) and a lockdown DPN. Read more about Director Penalty Notices or contact SV Partners for more information.
