Being a director of a company carries significant legal obligations and responsibilities. One of your key duties is ensuring the company’s tax and superannuation obligations are properly reported and paid on time.
Failing to meet these obligations can have serious consequences. In certain circumstances, you may become personally liable for the company’s unpaid debts. These liabilities include:
- Pay As You Go (PAYG) Withholding
- Goods and Services Tax (GST)
- Superannuation Guarantee Charge (SGC)
To recover outstanding liabilities, the Australian Taxation Office (ATO) may issue a Director Penalty Notice (DPN). A DPN shifts liability from the company to you as the director.
The notice will outline the unpaid amounts. Once issued, you have 21 days from the date of the notice — Not from the date you receive it — to take action.
Your options within that 21-day period include:
- Paying the debt in full; or
- Engaging with the ATO to negotiate a payment arrangement.
If no action is taken within 21 days, the director becomes personally liable for the outstanding debt. At this point you can no longer pay the debt, appoint an administrator or begin winding up the company to avoid paying the penalty personally.
The penalty amount is equal to the company’s unpaid liabilities under its PAYG, GST and superannuation obligations.
It is critical for directors to actively monitor and manage company debts. If you receive a DPN, treat it as urgent and please feel free to contact our office to discuss further.
Tip: Ensure your registered office address with Australian Securities and Investments Commission (ASIC) is up to date. DPNs are sent to the registered address, and failing to receive it does not stop the 21-day deadline from running.
