If you’re a company director, the Australian Taxation Office’s (ATO) October announcement about enforcement changes to Director Penalty Notices (DPNs) should be on your radar. With stricter rules in place, unresolved tax or superannuation obligations could now pose a serious personal financial risk. In this blog, we break down how DPNs work, what they mean for directors, and the critical actions to consider if one lands in your inbox.
What is a Director Penalty Notice (DPN)?
A DPN is a formal warning from the ATO that holds directors personally responsible for their company’s unpaid PAYG withholding, GST or superannuation guarantee charges. Ignoring a DPN isn’t an option; inaction could lead to severe financial consequences, including the possibility of personal bankruptcy.
Types of DPNs: Lockdown vs. Non-Lockdown
The ATO issues two types of DPNs, each with unique consequences:
Lockdown DPN
A Lockdown DPN is issued when overdue obligations have not been reported within the ATO’s specified timeframe. This is the more severe type of DPN, as it leaves no escape from personal liability—even if the company is placed into administration or liquidation. Here, the only way out is to pay the debt or negotiate a settlement with the ATO.
Non-lockdown DPN
A Non-lockdown DPN applies when obligations have been reported but remain unpaid. This type offers directors more flexibility, allowing them to remove personal liability by:
- Paying the outstanding amounts,
- Placing the company into voluntary administration, or
- Appointing a liquidator.
What to do if you are served with a DPN?
When a DPN arrives, acting quickly, and before the due date mentioned in your DPN, is crucial. Here are your options, providing you respond to the DPN on time:
- Communicate with the ATO
A proactive approach with the ATO can help you arrange a payment plan to settle the debt and avoid further escalation. - Pay the debt
The most direct solution, if feasible, is to pay the outstanding amount. - Explore restructuring options
For Non-lockdown DPNs, voluntary administration or liquidation may provide relief from personal liability. - Consult a professional
Consulting a tax advisor or accountant immediately can help you make informed decisions and prevent personal financial strain.
Staying ahead of the ATO’s stricter compliance measures
With the ATO’s increased focus on compliance, a proactive approach is key to staying on top of your obligations and safeguarding your personal assets. Our team is ready to help you navigate these changes and manage your tax obligations, to protect your assets and keep your business running smoothly.
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