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If you run a business of any size, it’s vital you understand what a director penalty notice (DPN) is and how to deal with one.
Here is an explainer, as shared by a Gold Coast Business Lawyer.
What is a Director Penalty Notice (DPN)?
A director penalty notice is issued by the Australian Taxation Office (ATO) to the director of a business that has failed to pay its tax bill (usually three months or more after the due date) or has not filled out the business’ Business Activity Statement (BAS) on time.
The DPN will tell the business director how much is owed and provide available payment options or other methods to resolve the matter.
It will also outline a new timeline for making repayments. Generally, it will present you with one of two conditions:
- A lockdown DPN: This will make you, as the Director, immediately financially responsible for repayment.
- A set time period to repay: In this instance, the most common time period is 21 days to make the relevant repayments.
What makes a DPN different and extremely important for company directors to know about is that it makes the director directly responsible for tax liabilities. That means that you, as the director, have to find the money or you will face consequences. The notice is arranged this way to ensure that company directors don’t simply dissolve companies to avoid tax debts.
You should also take note that a DPN is valid from the time it is delivered to either the registered business address of your company or your residential address. If you have recently moved, it makes no difference, the date it arrives at your previous address still stands.
Even if you are a former director and have left the company with the overdue tax debt, you could still be liable for the repayments. As a new director who has been in the role for more than 30 days, you may also be held personally responsible for unpaid tax money.
How to deal with a DPN
If you have received a DPN, don’t panic. There are still ways to resolve it.
The first and most obvious is to pay the debt in full, straight away. Maybe you just didn’t get around to paying the bill, or it got lost in a pile of paperwork. Pay it off ASAP and you can move on.
If it’s not feasible to pay the whole bill in one go, contact the ATO right away or ask your Gold Coast business lawyer to do so on your behalf. More often than not, the tax office will allow you to pay the bill over time using an instalment plan. But before you do, you must get expert advice. If you enter a payment plan, your personal liability does not go away and there will be serious consequences if you chose this path and can’t meet the payment obligations.
Your other options are to:
- Put your company into administration or liquidation
- Work with a professional to restructure your business.
- Present the ATO with a valid reason for late payment
If you can convince the ATO that you had legitimate reasons for failing to pay, like serious illness or some other unavoidable issue, they might relax the DPN. You will still need to pay the money owed at some stage, though.
If you don’t take any of the steps above, you will become personally liable to repay the amount owed in full, and unfortunately, time is not on your side.
When it comes to DPNs, prevention is always better than cure. If you have a good accountant and bookkeeper, they should be able to help you ensure your tax-relevant payments are up to date.
What to do if you receive a DPN
The most important thing to do if you receive a DPN is to act quickly.
Get your paperwork in order as much as you can, then contact your Gold Coast business lawyer and accountant as soon as possible. They will sit down with you to help work out the most suitable solution.
Need to know more about DPNs? Contact a Gold Coast business lawyer today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
