A director penalty notice is a notice the ATO gives to a current or former company director when the company hasn’t paid certain tax and super amounts. Those amounts can then be recovered from the director personally. The ATO calls them director penalties.
The ATO has to give you the notice before it can start recovering a director penalty. The notice sets out the unpaid amounts and the ways the penalty can be remitted, which means cancelled. You have 21 days to take one of them.
A director penalty is a parallel liability. Your liability mirrors the company’s, so a payment by the company or by any director reduces the amount for everyone. If the company has more than one director, each one can be liable for the same amount.
If the company hasn’t reported what it owes, the ATO can make a reasonable estimate, and director penalties can apply to that estimate. The business tax debt overview covers the wider picture.
On the day the ATO posts the notice, or leaves it at the address registered with ASIC. Not the day it reaches you.
If the registered address is out of date, some of the 21 days may pass before you see it.
New directors: you won’t be liable for penalties that were due before your appointment if, within 30 days of being appointed, the company pays in full, appoints an administrator or restructuring practitioner, or is wound up.
Former directors: resigning doesn’t end liability for debts from the time you were a director.
After the 21 days, the ATO can take action to recover the director penalty from you personally. You won’t have to pay it if you lodge a successful defence.
A DPN is one route to personal liability, not the only one. Personal guarantees on leases, loans and supplier accounts can make a director liable whatever happens with the notice. That’s why we look at the whole position, not just the notice.
On the day the ATO posts the notice or leaves it at the address registered with ASIC, not the day you open it. If the registered address is out of date, some of the 21 days may pass before the notice reaches you, so check the date printed on it.
It depends on when the company reported the debt. If PAYG withholding or GST was reported within 3 months of the due date, or SGC by its due date, the penalty can be remitted within 21 days by paying in full, appointing an administrator or a small business restructuring practitioner, or starting to wind up the company. If it was reported late or not at all, paying the debt in full is the only way to remit it.
No. A payment arrangement isn’t one of the ways to remit a director penalty. Payments under a plan reduce the debt, and the penalty is remitted once the company debt is paid in full. Entering a plan doesn’t extend the 21 days for the other options.
Yes. The super guarantee charge is one of the debts a DPN can cover, along with PAYG withholding and GST. For SGC, the test is whether the SGC statement was lodged by its due date.
You won’t be liable for director penalties that were due before your appointment if, within 30 days of being appointed, the company pays the amount in full, appoints an administrator or a small business restructuring practitioner, or is wound up. Resigning within those 30 days doesn’t remove the liability.
You can be. Resigning doesn’t remove liability for debts that were due before you resigned, or that relate to periods when you were still a director. You also stay liable after the company is deregistered.
After the 21 days, the ATO can recover the penalty from you personally. That can include offsetting your tax refunds or credits, issuing a garnishee notice, for example to your bank, and taking legal action.
No. Debt Negotiators isn’t a registered liquidator, administrator or restructuring practitioner. We help directors understand where they stand and which options may be open. Where restructuring looks worth exploring, we work with a panel of registered small business restructuring practitioners, and may receive a referral payment or fees for pre-insolvency work. Debt Negotiators is a fee-based service.
Talk to us about your options. Debt Negotiators is a fee-based service, and fees are explained before you decide.
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