You may have experienced the pressure of not being able to keep up with your tax debts, especially during the current period of economic uncertainty. If you are in this situation you are probably also wondering what can the ATO do to recover the tax debt they are owed.

This is the second part of a 3-part series where we look at the steps the ATO can take if you don’t pay your tax debts. In this article, we look at ATO Director Penalty Notices.

Generally, before the ATO takes any serious action is taken against you or your business, they will contact you or your accountant. And this is when you should engage with the ATO and negotiate a payment arrangement. Because if you don’t the ATO will take recovery action against you or your business. With one of the types of recovery action the ATO can take, being issuing a Director Penalty Notice.

What Is A Director Penalty Notice?

A Director Penalty Notice allows the ATO to collect certain tax debts of a company from the directors personally.

What Are The Effects Of A Director Penalty Notice?

As a general rule, directors of a company are not liable for the debts of a company. The corporate structure however, does not protect a director if a Director Penalty Notice is issued. The notice has the effect subjecting the directors to certain tax debts of a company including GST, PAYG Tax and unpaid superannuation. We have explained the instances where a Director Penalty Notice can be issued here.

If a director is liable under a Director Penalty Notice, the ATO can:

• Commence legal action and obtain a Judgment from the Court; or
• Issue a Garnishee Notice to take money from the director’s bank or wages payable to him or her;
• Issue bankruptcy proceedings against the director.

If a company has more than one director, the ATO will issue Director Penalty Notices to all directors. It is then common that the director(s) that the ATO considers have the best ability to pay will be targeted for further recovery action. Information on director’s ability to pay can be obtained from the director’s past tax returns or other information available to the ATO.

How We Can Help

If your company has outstanding tax debts, don’t wait until you have received a Director Penalty Notice. Find out what you can do to solve your problems by getting in contact us for a free, no-obligation consultation.

If you have received a Director Penalty Notice, you should obtain professional advice urgently. So, you should urgently contact us for a free, no-obligation consultation.