Over recent times the ATO has been lenient when handing out Director Penalty Notices (DPN), due to COVID lockdowns and the effect it had on business. However, they have made some major changes to DPNs, specifically making it harder for directors to avoid them.
What are the changes?
A director could previously enter the company into a payment plan, to pay off any outstanding tax or super guarantee debts. Entering a payment plan would prevent a director form receiving a DPN.
However, entering a payment plan will no longer prevent a director from receiving a DPN. Therefore, directors will remain personally liable for the debts (SGC, unpaid PAYG withholding, or net GST).
What can a director do?
Within 21 days of receiving a DPN a director must do one of these four options:
1. Completely pay the liability
2. Put the company into administration
3. Appoint a Small Business Restructuring Practitioner (SBRP)
4. Put the company into liquidation
It is important to remember that even if you are no longer a director of the company, you may still be liable for penalties equal to the amount of the unpaid liabilities of the company.
What is the effect of this?
It is expected that removing the option of payment plans will lead to more directors receiving DPNs. This will inevitably lead to more companies either going into administration, liquidation or appointing a SBRP.
For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au