Director Penalty Notices
What is a Director Penalty Notice?
A Director Penalty Notice (DPN) is a formal notification issued by the ATO to directors of a company that has failed to meet its tax obligations. Under the Taxation Administration Act 1953 (Cth), directors may become personally liable for outstanding amounts, including:
- PAYG Withholding (PAYGW): Tax withheld from employee wages and certain contractor payments.
- Goods & Services Tax (GST): A 10% tax on most goods and services sold in Australia.
- Super Guarantee Charges (SGC): Unpaid employee superannuation contributions, including interest and penalties.
If these liabilities remain unpaid, the ATO can issue a DPN, detailing the amounts due and outlining potential recovery actions. If a company fails to report its obligations, the ATO may estimate the outstanding amounts and hold directors liable accordingly.
Who Can Be Held Liable?
Current Directors – Responsible for ensuring all PAYGW, GST, and SGC liabilities are reported and paid. Failure to do so may result in personal liability.
Former Directors – Remain liable for any outstanding debts that were due before their resignation. They may also be accountable for unpaid amounts that arose after resignation if they were due while they were still in office.
New Directors – Must ensure that company tax obligations are up to date within 30 days of appointment or they may become liable for historical debts.
Director Penalty Notices
Types of Director Penalty Notices
Remittance DPN
Issued when company debts are reported within 3 months of their due date. Directors can avoid personal liability by ensuring the company:
Pays the outstanding amounts in full, or
Appoints an administrator, restructuring practitioner, or begins liquidation.
Lockdown DPN
Issued when company debts remain unreported for more than 3 months. In this case, directors must pay the penalties in full, as administration or liquidation will not remit the debt.
A lockdown DPN can result in personal liability and ATO recovery actions, including garnishee notices, asset seizures, or legal proceedings.
Need Expert Guidance?
Let Norwest Advisory Help!
Understanding Director Penalty Notices and their consequences is crucial for any company director. If you have received a DPN or want to minimize your risk, our team at Norwest Advisory is here to help.
Our experts provide tailored advice, compliance strategies, and financial solutions to protect your personal assets and ensure your company meets its tax obligations.