Director Penalty Notices
Recent changes have been made to Director Penalty Notices (DPN). These are notices served by the Tax Office to a company director which set out obligations of the director in relation to certain outstanding tax debts of the company. If appropriate action is not taken by the director or the company, the tax, which is the subject of the DPN, will become a personal liability of the directors.
When a DPN is received, the director has 21 days from the date of issue to comply with either of the following:
- Have the company pay the amounts to which the DPN relates; or
- Ensure the company either:
- enters into administration pursuant to the Corporations Act 2001; or
- winds up pursuant to the Corporations Act 2001.
There are defences available to directors which have been reduced under these recent changes. The onus of proof relies on the director to prove that they did not take part in the management of the company because of illness or some other good reason at the time the company incurred the tax debts which are the subject of a DPN and that it was unreasonable to expect the director to take part in the management of the company at the time.
DPNs are one of many tools available for use by the ATO, but they are effective in that they make directors liable for company debts. If a DPN is received and the company is unable to meet its obligations with the ATO, we recommend that you immediately seek our advice or contact an insolvency specialist.