28 March ATO Release - Director Penalty Notices

On 28 March 2022, the ATO issued a release relating to its Director Penalty Notice ?(DPN) program.?The release stated that the ATO will be sending letters to directors of companies that are not up to date with PAYG withholding, Superannuation Guarantee Charge (SGC) and GST obligations.?This represents a change in the regulatory disposition that applied during the height of the COVID-19 pandemic.

The letters will advise directors that the ATO is considering issuing them with a DPN, which makes them personally liable for the abovementioned debts.?Before the ATO can recover director penalties from directors personally, it must first give the director a Director Penalty Notice (DPN) outlining the unpaid amounts and remission options available.

Diligence upon being appointed as a director

What to check for

If you are about to become a director of a company, check for any unpaid or unreported PAYG withholding, goods and services tax (GST) or SGC liabilities.?The importance of pre-appointment due diligence cannot be over-stated.

Your risk

If you become a director and the company has outstanding PAYG withholding, net GST or SGC obligations, you will become personally liable for a penalty equal to these amounts (director penalties).

As a new director, you have 30?days, starting on the day of your appointment, before you become liable to director penalties equal to:

·???????all?of the company's unpaid PAYG withholding liabilities

·???????all?unpaid net GST liabilities (inclusive of LCT and WET) from 1?April 2020;

·???????all?unpaid SGC liabilities from 1?April 2012.

Avoiding the liability

However, as a new director, you will not be liable to director penalties for amounts due before your appointment if, within 30?days starting on the date of your appointment, the company does one of the following:

·???????pays their PAYG withholding, net GST or SGC debt in full

·???????appoints an administrator under section?436A, 436B or 436C of the?Corporations Act 2001

·???????appoints a small business restructuring practitioner under section 453B of that Act

·???????begins to be wound up (within the meaning of the?Corporations Act?2001).

Resignation is not effective to avoid penalties

Even if you become a new director and resign within the 30?day period, you will still be liable:

·???????for unpaid PAYG withholding, net GST or SGC liabilities of the company that were due before your appointment;

·???????for PAYG withholding and net GST, any unpaid liabilities for reporting periods that started while you were a director, except if you resigned before the first withholding event in that period; and

·???????for SGC, any unpaid liabilities for reporting periods that started while you were a director, except if you resigned before the date the charge became payable.

Ongoing diligence while acting as director

If your company fails to meet a PAYG withholding, net GST or SGC liability in full by the due date, you will become personally liable for director penalties equal to the unpaid amounts.

To avoid director penalties, take steps to have the company lodge and pay its:

·???????PAYG withholding by the due date

·???????Net GST (inclusive of LCT and WET) by the due date

·???????super guarantee (SG) to employees' super funds by the due date or, if that doesn't occur, lodge a super guarantee statement and pay the resulting SGC liability.

Make sure your address is current

ASIC will send the DPN to your address registered with Australian Securities & Investment Commission (ASIC). ?The date ATO posts the DPN is the date the notice is?given?to you. Make sure that your registered address is current so that you don't miss any notices from ASIC or the ATO.

Cautionary Note: this note is not legal advice.?You should seek legal advice before taking any action.

Brent Van Staden

Partner

Head of Capital Markets

https://www.dhirubhai.net/in/brentvanstaden/

?Colin Biggers & Paisley Pty Ltd

ABN 28 166 080 682

Level 35, Waterfront Place, 1 Eagle Street Brisbane QLD 4000 Australia

D +61 7 3002 8767 | M +61 414 234 531 | F +61 7 3221 3068

[email protected]

www.cbp.com.au

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