Director Penalty Notices

Know your responsibilities as a director

What exactly is a director penalty notice

A directors penalty notice or DPN is issued by the ATO in respect of unpaid company liabilities in respect of tax, superannuation or tax returns that have not been lodged.

So, how does a DPN work.

  • The ATO can commence proceedings against company directors once a liability for tax or superannuation is more than 3 months overdue. Prior to commencing proceedings however the ATO must issue a DPN.
  • Once the liability is more than 3 months overdue the ATO will issue the penalty notice in respect of the unpaid taxes or superannuation.
  • The director then has a period of 21 days from the date that the notice was issued to respond to DPN.
  • If the director does not act on the penalty notice within the required 21 day period then the ATO can commence proceedings against the director with the intention of recovering the outstanding liability.
  • In addition to directors of companies, associates of directors can also be held liable.

What are the options if you get issued with a DPN

  • The first option is to pay the outstanding liability to the ATO.
  • The second option is for the director to enter into personal insolvency.
  • The third option would be for you to negotiate an agreement under section 222ALA to repay the outstanding amount over a period of time.
  • In certain circumstances you may be able to use illness or the illness of a close family member as a defence against the DPN.
  • In the case of outstanding superannuation payments you can also potentially use reasonable care as a defence.

Need more information

As a director of a company you should make sure that you are familiar with the company's outstanding tax liabilities and that you understand when these payments are due. If you do not believe that your company can meet it's tax obligations then you should seek professional advice immediately.

Jamieson Louttit and Associates are expert insolvency advisors who can give you unbiased advice in terms of what your options are, what your next steps should be and how to minimise your liability. Call us today on 02 9231 0505 for a free initial discussion in terms of how we can help you.

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