Director Penalty Notices can be a serious concern for company directors, both past, present and yet to be appointed. Here’s everything you need to know about Director Penalty Notices (DPN) as a company director in Australia.
Have you been newly appointed as a company director? Did you know that under The Director Penalty Notice regime, newly appointed company directors have 30 days from the date of appointment to deal with that company’s past tax and superannuation debts, otherwise they can be held personally liable for those debts in the form of a Director Penalty Notice.
A Director Penalty Notice (DPN) is a notice issued by the Australian Taxation Office (ATO) to a company director, informing them that they may be personally liable for the company’s unpaid tax debts. This includes debts related to payroll tax, goods and services tax (GST), and income tax. In some cases, directors can also be liable for the company’s unpaid superannuation guarantee charges.
In Australia, all company directors have a legal responsibility to ensure that their company meets its tax obligations. This includes ensuring that the company lodges its tax returns on time and pays any tax debts that are owing. If a company fails to do so, the ATO may issue a DPN to the directors, putting them at risk of personal liability for the company’s unpaid tax debts.
It’s worth noting that the ATO has the power to issue DPNs to both past and present company directors, and they don’t need to prove that the director was aware of the company’s non-compliance or intended to defraud the ATO. This means that even if a director wasn’t aware that the company had unpaid tax debts, they may still be held liable for them under a DPN. Resigning from the company does not erase personal liability, even if done so within 30 days.
To avoid the risk of being issued with a DPN, it is important for company directors to understand their responsibilities and to ensure that their company is meeting its tax obligations. This may include seeking advice from a qualified accountant or tax professional.
An accountant can help a company and its directors to stay compliant and avoid being issued with a DPN by:
- Reviewing and preparing financial statements and tax returns
- Advising on tax planning strategies
- Keeping track of the company’s tax obligations and deadlines
- Identifying and addressing any issues that may lead to non-compliance
- Negotiating with the ATO on behalf of the company and its directors
- Representing the company and its directors in court, if necessary.
An accountant can also help company directors to understand their rights and options if they have received a DPN. This may include helping them to negotiate a payment plan with the ATO or appealing the DPN if they believe it has been issued incorrectly.
It is also important for company directors to stay informed about their company’s financial situation, and to be aware of any potential tax issues that may arise. An accountant can assist in monitoring the company financials and providing regular reports, which will allow directors to identify and address any potential tax issues before they become a problem.
In summary, Director Penalty Notices are issued by the ATO to company directors who may be personally liable for the company’s unpaid tax debts. It’s important for company directors to understand their responsibilities and to ensure that their company is meeting its tax obligations to avoid the risk of being issued with a DPN. Seeking advice from a qualified accountant or tax professional can be extremely helpful in this regard. They can provide guidance on how to comply with tax laws, assist with monitoring the company’s financials, and provide support and advice if a DPN has been issued.
It’s crucial for company directors to understand their obligations and take appropriate action to avoid DPNs. At PTP our experienced certified accountants can provide valuable support and guidance in this regard, helping to ensure that a company stays compliant and avoids any personal liabilities for the directors.