Directors and their accountants need to know how to reduce the risk.
Key Takeaways
- A DPN can be issued by the Australian Taxation Office
- It can make directors of a company personally liable for unpaid superannuation PAYG and GST
- Helps ATO recover unpaid tax and superannuation debts
Insolvency and business turnaround solutions specialist Jirsch Sutherland is urging directors and their accountants to understand how to reduce the risk of being held personally liable for unpaid tax and superannuation at a company.
“A DPN is a formal notice issued by the ATO to directors of a company to make them personally liable for things like unpaid superannuation, PAYG and GST. And because many business owners run their businesses through a company structure, it means the DPNs can be a major burden on directors,” says Bradd Morelli, Jirsch Sutherland’s National Managing Partner. “That’s why it’s crucial to understand what DPNs are and how you can reduce the risks.”
Types of DPNs
There are two types of DPNs: lockdown and non-lockdown DPNs.
A lockdown DPN is issued to directors where the company has not lodged its BAS within three months of the due lodgement date; or SGC Statement by the lodgement due date; and the tax debt has not been paid.
A non-lockdown DPN is issued to directors where the company has reported its BAS within three months of the due lodgement date or its SGC statement on time, but the obligations remain unpaid.
Morelli says anyone about to become a new director should do their due diligence.
“It’s extremely important to check whether or not the company has any unpaid or unreported PAYG tax, GST or Superannuation Guarantee (SGC) liabilities.
“Once you’re appointed as a company director, you become personally liable for any unpaid amounts – even for periods prior to your appointment.
“Even if you resign as a director of the company, while there’s a 30-day ‘window’, if the company liability isn’t paid or an external administrator isn’t appointed, you remain liable for the liabilities that were due before the date of your resignation,” he says.
7 tips to help directors manage ATO and DPN risks
- Lodge on time (or at least less than 3 months after the lodgement due date)
- Maintain director’s current residential address details with ASIC
- Open and read correspondence received from the ATO. Seek help if you do not understand what the correspondence is saying
- Communicate and engage with the ATO; do not stick your head in the sand and ignore them
- Watch for insolvency warning signs
- Communicate regularly, actively and meaningfully with your trusted advisers, such as your accountant
- Get advice if you suspect your business is in financial difficulty or is having trouble paying its debts when they are due – including its tax and super obligations.