Any company can be issued a Director Penalty Notice. The Australian Taxation Office (ATO) began their debt recovery process by issuing Director Penalty Notices to directors of company’s who have not met or reported their tax obligations. As a company director, you have a legal responsibility to ensure your company meets all the corporate governance obligations so your company can strive to be the best that it can be.
What is a Director Penalty Notice?
It is a notice that the ATO sends the company director in one of various situations. For example, the penalty notice can make the director personally liable for either the company’s Pay As You Go (PAYG) withholding requirements or Superannuation Guarantee Charge (SGC) responsibilities.
There are two different types of Director Penalty Notices (DPN) that can be issued to your company from the ATO. The first is the ‘21-Day DPN’ which gives company directors 21-days to act accordingly with regards to their tax debts that are owed. If company directors don’t comply with the first notice, then a second notice called the ‘Lockdown DPN’ is issued. This results in an automatic personal liability notice that gets served straight to the director by the ATO.
Different Opinions for Directors with Penalty Notices
If you are issued a Director’s Penalty Notice, then there are only a limited number of options that you can take.
These include:
- paying the debt in full,
- appointing an administrator to the company,
- having a liquidator appointed to the company to help clear the debt.
How to avoid getting issued with a Director’s Penalty Notice
The most effective way to avoid getting issued a penalty notice is to create a series of good habits. This will ensure your company strives and will help you to keep on top of all your tax commitments.
Directors should use some of the following tips to help them strive with their company tax commitments.
- The first tip is to always be aware of your company’s financial position and to make sure that all BAS’s and IASs are lodged on time.
- The second tip is to monitor your tax commitments by checking PAYG withholdings, GST, and your superannuation payments.
- The last and final tip is to be proactive with your company by identifying if your company can meet the financial commitments with PAYG withholding as it is a legal obligation as a company director.
So, in conclusion if your company is issued with a Director’s Penalty Notice then follow the steps above to achieve your company goals by clearing your tax debts. Remember to also consult with your accountant to ensure that you’re declaring all income and only claiming business related deductions.
For all your accounting needs, feel free to contact Lana and her team at Matovic Business Accountants
Email us at info@matovicaccounting.com.au or call (07) 3557 5721.
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