Director Penalty Notices
The ATO can make company directors personally liable for unpaid GST, PAYG and superannuation. The ATO does this by issuing directors with Director Penalty Notices. The ATO has recently announced they will no longer enter payment arrangements for amounts payable under Director Penalty Notices.
If the ATO issues a Director Penalty Notice, directors can avoid liability by paying the debt, or appointing a Voluntary Administrator, a Liquidator or a Small Business Restructuring Practitioner within 21 days of the date of the Notice (known as a 21 Day Director Penalty Notices). This is only possible where lodgements are made within the following periods:
- Activity statements must be lodged within three months of their due date; and
- If superannuation is not paid, SGC statements must be lodged within one month of superannuation being due for payment.
Where lodgements are made outside these periods, directors are automatically liable for GST, PAYG and superannuation and appointing a Voluntary Administrator, a Liquidator or a Small Business Restructuring Practitioner, will not avoid liability. These are knowns as Lockdown Director Penalty Notices and the only option is to pay the debt in full.
Again, it is important to note that the ATO recently advised they will not enter payment arrangement for these amounts.
It is therefore important to make activity statement lodgements on time and if superannuation is not paid on time, lodge Superannuation Guarantee Charge statements. It is also important to:
- Ensure your address as a director is up to date with ASIC, as Director Penalty Notices are sent to director’s personal addresses. If your company has a tax or superannuation debt you should also check any mail you receive from the ATO as it may be a Director Penalty Notice.
- If your company has a tax or superannuation debt, negotiate a payment arrangement with the ATO before the Director Penalty Notice is issued, as the ATO has a policy of not issuing Director Penalty Notices when a payment arrangement is in place and being complied with.
- Consider how your business and personal financial position are structured as there are various financial risks involved in being a director of a company.