Navigating the ATO’s Enforcement Measures
In the complex territory of tax obligations, the Australian Taxation Office (ATO) is actively deploying Director Penalty Notices (DPN) at an average rate of 60 per day, as revealed by the ATO themselves.
A DPN does not confer liability upon directors for outstanding company debt, as directors are inherently liable by law. Rather, it serves as a formal notification that initiates a countdown, compelling directors to either remit the debt promptly or confront the ensuing consequences.
There are imperative steps for directors to take in response to a DPN:
- Complete business lodgements even if there is an inability to pay associated liabilities such as PAYG, GST and superannuation
- Ensure business address accuracy on ASIC’s register
- Seek advice from a liquidator if you are unable to meet the DPN amount.
Lockdown DPNs
A lockdown DPN comes into play when a company fails to lodge Business Activity Statements (BAS) and Instalment Activity Statements (IAS) within three months of the due date or Superannuation Guarantee Charge (SGC) statements within one month and 28 days after the quarter’s end to which the superannuation charge contribution relates. In such cases, directors face automatic and permanent exposure to penalties, with the sole remedy being full payment of the debt.
Non-lockdown DPNs
Conversely, a non-lockdown DPN provides directors with a 21-day window to consider options for remitting the applicable tax (penalty). The available choices include paying the debt, appointing a voluntary administrator, engaging a small business restructuring practitioner or appointing a liquidator. Failure to act within this timeframe results in the penalty becoming permanent, empowering the ATO to initiate debt recovery proceedings.
Adding a layer of complexity, the ATO now issues DPNs that break down amounts owed into lockdown (monthly unremitted amounts) and non-lockdown (monthly remitted amounts) columns.
Navigating the intricacies of DPNs can be challenging for directors, so engaging with a qualified tax advisor is crucial to gaining the necessary support and understanding:
- Explaining the mechanics of DPNs
- Reviewing individual circumstances to provide tailored assistance and outlining options based on unique circumstances
- Offering support throughout the decision-making process.
In essence, understanding and responding to Director Penalty Notices requires a comprehensive approach, combining intricate tax knowledge and strategic insights, ensuring directors are well-equipped to address these ATO enforcement measures.
CONTACT ALLAN HALL BUSINESS ADVISORS