What is a DPN?
A DPN is a penalty issued by the ATO that makes a director personally liable for the company’s taxation liabilities. These include GST, PAYG and Superannuation debts.
A director of a company is responsible for carrying out certain necessary activities, including statutory duties, preparation of accounts and reports etc. Failing to do so may result in the director being held personally responsible and being issued with a Director Penalty Notice (DPN).
It is now even easier for directors to receive one. From 29 June 2012, due to the strengthening of the ATO’s powers under the DPN regime, non-lodgement of BAS and Superannuation Guarantee Charge (SGC) statements will see directors being held responsible, with no amount of good intention or plea of ignorance being grounds for waiving.
Further, GST became subject to the Director Penalty Notice regime from 1 April 2020.
Did you know?
- New directors: Before taking over as a director of a company, it is imperative that directors check for any unpaid PAYG withholdings, GST or SGC. If they don’t, and there are outstanding debts, they will become personally liable for these debts and any penalties.
- Insolvent: If a company continues to trade whilst insolvent, any debts that were incurred during this time will become the personal liability of the director. Note: a DPN can be issued at any time before or even after a Liquidator is appointed.
- Previous director: It can be years in the future that a director can receive a DPN and be personally liable for debt incurred before and during the time they were a director.
- Double Director Penalty: If a DPN is ignored and the matter is not handled correctly, a director can actually be hit with a double penalty
In summary
DPNs should be avoided by meeting statutory obligations and covering liabilities, however in the event that one is received, directors should obtain advice, as this can avoid the situation becoming worse and the director losing more personal money and/or assets.
If you would like to know more about DPN’s and what the best course of action to take should you receive one, please contact our office.
