A Director Penalty Notice (DPN) from the Australian Taxation Office (ATO) holds company directors personally liable for certain unpaid company tax debts, such as Pay As You Go Withholding (PAYGW), Goods and Services Tax (GST), and Superannuation Guarantee Charge (SGC). The ability to remit (remove) a director penalty through a payment plan depends on the type of DPN issued and the timing of the company’s tax lodgments.
Types of Director Penalty Notices:
- Non-Lockdown DPN: Issued when the company has lodged its tax statements within the required timeframes but has unpaid tax debts. Directors have 21 days from the date the notice is given to take one of the following actions to remit the penalty:
- Pay the debt in full.
- Appoint an administrator.
- Appoint a small business restructuring practitioner.
- Begin winding up the company.
Previously, entering into a payment arrangement with the ATO could remit the penalty under a Non-Lockdown DPN. However, as of April 2020, this is no longer the case; a payment plan does not remit the director penalty.
- Lockdown DPN: Issued when the company has failed to lodge its tax statements within the required timeframes, resulting in unreported and unpaid tax debts. In this scenario, the only way to remit the director penalty is to pay the debt in full. Neither entering into a payment plan nor other actions will remit the penalty under a Lockdown DPN.
Key Considerations:
- Payment Plans: While entering into a payment plan does not remit the director penalty, it may influence the ATO’s decision to pursue recovery actions against the director personally. The ATO may be less likely to take personal recovery action if the company is in a compliant payment arrangement and adheres to it. However, this does not remove the director’s personal liability.
- Timely Lodgement: Ensuring that the company lodges its tax statements on time is crucial. Timely lodgement can prevent the issuance of a Lockdown DPN, which offers no remission options other than full payment.
Conclusion:
Entering into a payment plan does not remove a director penalty under a DPN. For Non-Lockdown DPNs, remission of the penalty requires specific actions within 21 days, and a payment plan is not among them. For Lockdown DPNs, the only way to remit the penalty is by paying the debt in full. It’s essential for directors to act promptly upon receiving a DPN and seek professional advice to understand their obligations and options.
