Director Penalty Notices (DPN)

Directors need to be more aware of the increased ATO scrutiny of company reporting and payment obligations.

       

 

The ATO has been quickly increasing its focus on business audits, its 'dob-in’ a business scheme, collecting outstanding tax liabilities, and its visits to regional business sites.  This is a lot already but it's not all, the ATO is also increasing the amount of Director Penalty Notices (DPN).

What is a DPN?

A Director Penalty Notice (DPN) means the directors of a company can be pursued directly for outstanding Superannuation Guarantee Charges (SGC) and Pay as You Go (PAYG) liabilities.  Directors are no longer protected by a company’s corporate structure.

Under what circumstances would a DPN be issued?

  • Historical non-reporting;
     
  • Significant ATO debt which remains unpaid;
     
  • Suspicion of phoenix activity.  Phoenix activity is defined by the ATO here.

Obviously the main ATO trigger points for issuing a DPN relate primarily to obligations that have been outstanding for some time, though the current length of an outstanding obligation will most likely be shortened in the future.  Equally obvious is that phoenix activities are illegal. 

Directors need to pay very close attention to their company’s reporting and payment obligations and your accountant is well placed to help.  If you have any concerns, then don't hesitate to ask. 

Being more focused on these issues may sound relatively simple but in larger companies the directors may not have direct oversight regarding the company’s tax compliance obligations. In such cases all key personnel must also be very aware of the greater ATO scrutiny, and act accordingly. 

Nor are new directors exempt.  If there is an SGC, PAYG and GST liability that remains unpaid and unreported within 3 months from the date of a new director’s appointment then they too become liable.

Directors only have 21 days from the date a Director Penalty Notice is issued to act and avoid personal liability.

 

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