The director penalty notice (DPN) regime is one used by the Australian Tax Office (ATO) to recover debts owed to the ATO. The ATO has the power to issue DPNs to directors to make them personally liable for their company’s tax debt. Directors are otherwise not usually liable for debts of their companies.

Types of Director Penalty Notices?

There are 2 types of DPNs that the ATO can issue, being:

• 21-Day DPN – a 21-Day DPN is issued to directors where there is unpaid GST, but the company’s activity statements have been lodged within 3 months of due dates. The directors can avoid personal liability if, within 21 days, the GST is paid, or the company is placed under liquidation, voluntary administration, or taking advantage of the small business restructuring
• Lockdown DPN – a lockdown DPN on the other hand is issued to directors whose companies have unpaid GST and have not lodged their activity statements by the due dates. In this case, directors cannot avoid personal liability.

More information about DPNs, including the defences available and ways to avoid DPN liability can be found here.

Director Penalty Notices for unpaid GST

As we have written previously, the ATO has, since 1 April 2020, the power to:

• Estimate the payable GST if GST is not reported to the ATO;
• Issue DPNs to directors for unpaid GST; and
• Collect unpaid company tax debts from directors if no action has been taken by the directors upon expiry of the DPNs, or where a lockdown DPN has been issued.

Whilst the ATO has had the power since 1 April 2020, the ATO has not issued a single DPN as at 30 June 2021 for unpaid GST due to the ongoing impact of the COVID-19 pandemic on businesses. Now that the economy is slowly getting back to normal however, we expect the ATO will increase efforts to recover tax debts, including unpaid GST.

We can help

If your company has unmanageable tax debts, now is the time to take steps to minimise personal risks. The team at TAX DEBT SOLVED is led by practitioners with more than 20 years of experience in dealing tax debts. Contact us for a free no-obligation consultation to discuss you circumstances.