Undoubtedly, most of us know about the Australian Taxation Office’s (ATO) push to recover outstanding taxes through Director Penalty Notices, better known as DPNs.

A quick summary (which you can skip if you’re across them) is:

• A DPN is a notice issued by the (ATO) to a director in respect of certain unpaid tax and superannuation liabilities.
• A DPN may be a 21 Day (standard) DPN or a lockdown DPN. Each type has differing courses of action https://rodgersreidy.com/the-ato-is-gearing-up-for-director-penalty-notices/
• If a standard DPN is not addressed, the receiving director becomes personally liable to pay the debts involved. A lockdown DPN is immediate liability for the receiving director.
• DPNs apply to outstanding PAYG withholding tax, Superannuation guarantee charge, GST, Luxury Car Tax and Wine Equalisation Tax.

Importantly, there are ways to avoid becoming personally liable, and time is of the essence.

21 Day DPN (standard DPN)

You can take a number of actions to deal with the standard DPN. Recalling that all lodgements will have been made on time, you can:

1. Have the company pay the relevant debts;
2. Place the company into Voluntary Administration;
3. Appoint a Small Business Restructuring Practitioner;
4. Place the company into Creditors Voluntary Liquidation

Lockdown DPN

A lockdown DPN means the company failed to lodge its required reporting within specified times. As such, the options are far more restrictive and include:

1. Have the company pay the relevant debts;
2. Personally pay the debts;
3. Personally negotiate with the ATO for a payment arrangement;
4. Enter into a formal personal insolvency arrangement, including a debt Agreement, the appointment of a Controlling trustee and proposing a Part X agreement, or bankruptcy.

There are also defences for both types of DPNs that should be considered.

The available defences are:

1. As a director, you did not take part in the management of the company due to illness or some other acceptable reason;
2. You took all reasonable steps, unless there were no reasonable steps available, to ensure that one of the following events happened
a. The company paid the amount outstanding, or
b. An administrator was appointed to the company, or
c. A small business practitioner was appointed to the company, or
d. The directors began winding up the company (within the meaning of the Corporations Act 2001)

In applying these defences, many considerations are required, including applying the rules to the whole period and the onus on the director to articulate and provide support for their position.

If you or your clients require experience and expertise on receipt of a DPN, we are here to assist on a free, no-obligation basis to discuss the particular options to suit your client’s circumstances.