What Is A Directors Penalty Notice?
Directors have a legal obligation to ensure that their firm complies with its requirements regarding pay as you go withholding, goods and services tax, and superannuation. In the event that a corporation fails to fulfil their responsibilities, the directors of the company may be held personally accountable for the sum that the firm ought to have paid.
On March 5, 2020, new laws were enacted to extend the Director Penalty Notice (DPN) regime to include the Goods and Services Tax, the Luxury Car Tax, and the Wine Equalization Tax. The laws governing DPNs in relation to superannuation guarantee were also strengthened as part of the same piece of legislation.
The ATO is not permitted to initiate legal action to recover a director penalty until 21 days have passed since a DPN has been issued to a director.
The Non-Lockdown Penalty Notice and the Lockdown Penalty Notice are the two distinct varieties of DPNs.
Non-Lockdown Penalty Notice
Non-lockdown DPNs are issued to directors who have lodged business activity statements and instalment activity statements within three months of the due date for lodgement and superannuation guarantee charge (SGC) statements within one month and 28 days after the end of the quarter that the superannuation charge contribution relates to, but the debts remain unpaid. Non-lockdown DPNs are issued to directors who have lodged business activity statements and instalment activity statements within three months of the due date for lodge The notice provides the board of directors with a deadline of 21 days to respond, after which the penalty will be waived.
Lockdown Penalty Notice
In the event that a company has failed to lodge its business activity statements and instalment activity statements within three months of the due date for lodgement, as well as its SGC statements within one month and 28 days after the end of the quarter that the superannuation charge contribution relates to, lockdown DPNs will be issued to the company’s directors. If the debt is not settled in full, the director will be subject to the penalty indefinitely, and there is no way to remove the penalty other than to settle the amount in full.
Defending Against A Director Penalty Notice
The director penalty regime includes statutory defences that a director may invoke in order to demonstrate that they are exempt from director penalties. If any of the following conditions are met, a director will be exempt from liability for any director penalties that may be imposed:
- because of your illness or some other valid excuse, you did not participate in the management of the company during the relevant time period.
- you ensured that one of the following three things took place by taking all of the reasonable precautions possible, unless there were no reasonable precautions that you could have taken
- the outstanding balance was settled by the corporation.
- the corporation received new leadership in the form of an administrator.
- The board of directors started the process of winding down the corporation (within the meaning of the Corporations Act 2001)
- The corporation applied the Superannuation Guarantee (Administration) Act 1992 with reasonable care in the situation of an unpaid SGC liability, treating the Act’s application as one that may be claimed to be legal and in compliance with the law.
It is not a valid defence to assert that you depended on other people to make sure that your commitments were fulfilled since the courts have ruled that these defences have to be proven during the full time that the director was required to fulfil the responsibility.
How Do I Stop This From Happening?
Bookkept is able to assume responsibility for the management of a company’s BAS and retirement plans and will keep you updated on their progress at every stage to ensure that you are fulfilling your responsibilities as a director. We provide a variety of bookkeeping services, one of which is the submission of BAS and the establishment of payment arrangements for these.
If you are looking for an accountant or thinking it’s time you made a change, please give us a call on (03) 8568 3606. With over ten years of combined experience working with a diverse range of clients, Bookkept is well equipped to assist your business.