Insolvency News » director penalty notice

DIRECTOR PENALTY NOTICE—TEMPORARY REPRIEVE!

admin — Tue, 22 Nov 2011 21:47:17 +0000

We have previously reported that the government is looking to extend the current Director Penalty Notice regime from unpaid PAYG to include unpaid superannuation.

Yesterday, directors were given a temporary reprieve from the potential of personal liability to meet employees’ superannuation obligations but it is only temporary.

Bill Shorten the assistant treasurer said the measure would be re-introduced in early 2012 following more consultation with stakeholders.

So, for the time being, it remains that Director Penalty Notices relate only to unpaid PAYG – but change is likely in 2012.

Extension of Personal Liability for Company Directors – Superannuation

Wed, 18 May 2011 10:41:09 +0000

A Director Penalty Notice currently relates only to unpaid PAYG and a director may be held personally liable and lose personal assets if they do not comply with a DPN within 21 days of issue.

The Director Penalty Regime is being extended from 1 July 2011 to include SG payments.

That is, a director may become personally liable for unpaid superannuation and PAYG in the event of insolvency from 1 July 2011.

Further, superannuation Information on Pay Slips - Employers will be required to report the sum of contributions made to members when they are paid. Where a fund does not receive a payment at least quarterly this is to be reported to the member.

Important Changes to Director Penalty Notices (“DPN”)

admin — Wed, 07 Jul 2010 00:49:11 +0000

From 1 July 2010, there have been some extremely important changes in respect of Director Penalty Notices (“DPN”) that you (and your clients) need to know:
Under the old regime, if a director has received a DPN, he could avoid personal liability for the tax debt by entering into an installment payment arrangement with the ATO. Under the new regime, entering into an installment agreement will not remit the director’s obligations under the DPN. The only thing an installment agreement will do is to preclude the Commissioner from commencing proceedings to enforce the obligation of the director’s penalty notice for the period while payments are made.

The new regime confirms that a DPN takes effect from the date when it is posted – not when it is received by the director (DCT v Meredith)

The notice period of the DPN under the new regime has been extended from 14 days to 21 days before recovery proceedings can be taken against the directors.

To avoid personal liability, the company must appoint a Liquidator or Voluntary Administrator within 21 days from the date of the notice.

The defence of “illness or other good reason” is made more difficult for a director to rely on. In addition to establishing the director was ill or for some other good reason did not participate in the management of the company at the time the relevant tax liability fell due, the director must now also establish that it would have been unreasonable to expect her or him to have taken part in the management of the company at that time. This fixes drafting problems with the existing provisions.

the Court has no power under section 1318 of the Corporations Act to grant relief to a director from their obligations in respect of a DPN. This confirms the existing law in DCT v Dick.

The ATO has no discretion to remit a DPN regardless of circumstance.

If you need any assistance or further explanation in relation to DPN’s, please contact us 24 hours, 7 days per week on 1300 767 525.

Are you a Director? Have you moved lately? Update your residential address on the ASIC register – or else!!

Wed, 19 May 2010 03:46:19 +0000

Company directors MUST ensure their residential address details are kept up to date on the ASIC register.

If the ATO issues a Director Penalty Notice (“DPN”) – they send it to your home address as per the ASIC register.

If you don’t get it because it went to a previous address – that is no defence to the personal liability and loss of personal assets that the DPN will cause if not acted upon within 14 days from the date of the notice.

The NSW Court of Appeal recently held that a DPN was validly served by the ATO because it was sent by prepaid post to the directors address recorded on ASICs register, notwithstanding that the address was wrong.

The ATO is entitled to rely on the ASIC register and it does not have to go beyond such register to establish the correct address (Robertson v DCT).

Again, a director served with a DPN has fourteen (14) days to take corrective action in order to avoid personal liability. Such action includes

Paying the debt
Entering into an installment arrangement to pay the debt
Appointing a Voluntary Administrator
Appointing a Liquidator

If you have been served with a DPN you MUST act to avoid personal liability.

The ATO CANNOT issue a DPN once the company has been placed into Liquidation or Voluntary Administration.

Call The Insolvency Experts at Liquidation Direct for FREE confidential advice 24 hours – everday.

Call 1300 100 285 – 24 hours

An example of the ATO holding a director personally liable for PAYG

Mon, 03 Aug 2009 23:11:00 +0000

THE tax office is chasing failed Kleenmaid founder Brad Young for $1 million.

The Deputy Commissioner of Taxation has lodged a claim in the Supreme Court of Queensland against Mr Young for $1,033,855, plus interest and legal costs.

The ATO alleges that Mr Young - whose up-market whitegoods company collapsed owing $82m to creditors - failed to pay 14 months’ worth of “pay as you go” deduction debts.

Under Australian tax law, the directors of a company may be held personally liable for PAYG debts - unless they make a repayment plan with the tax office, appoint an administrator or start to wind up the company.

The statement of claim by the tax office, filed in the Supreme Court in Brisbane on July 10, says that Mr Young was a director of Kleenmaid Retail Pty Ltd from September 1, 2007, until February 23 this year.

It lists the company’s monthly PAYG deductions as ranging from $51,835 to $111,171 during Mr Young’s time as a director.

“The defendant is liable to pay to the commissioner the total sum of the penalties, which is $1,033,855,” the statement of claim alleges.

If you receive a director penalty notice – you must act on it before the 14 day period expires. if you fail to do so, you will be in the position of these directors.

Call Liquidation Direct for insolvency advice on 1300 767 525 or 1300 100 285

Tax Debts – you need to know about Director Penalty Notices

Thu, 04 Dec 2008 20:57:22 +0000

Every company that employs people are required to withhold tax from employee wages and entitlements and remit this to the tax office.

Often when a company is in trouble, this is one of the first payments directors choose not to pay.

Directors need to understand that while paying trade suppliers etc may feel better and provide some immediate relief from mounting creditor pressure, that they are actually putting their own personal finances at some risk.

The ATO can issue what is known as a Director Penalty Notice in respect of PAYG withholding amounts not remitted by the company.

If the Director Penalty Notice is issued and is not complied the director(s) will become personally liable for the outstanding tax debt of the company.

The ATO will generally issue the Director Penalty Notice when they have exhaused other avenues such as direct discussion and negotiation with the debtor company. For instance, if an instalment agreement fails repeatedly.

When the tax office issues the Director Penalty Notice, it sends it to the personal address of the director(s) as per the Australian Securities & Investments Commissions company register.

If you do not maintain your current address details with ASIC and the Director Penalty Notice is issued to your former address – you do not have a valid defence for avoiding liability under the notice. That is, non receipt of the Director Penalty Notice for the reason above is not a valid excuse for non compliance.

If a Director Penalty Notice is issued, you must act immediately as you only have 14 days to comply.

Comliance required one of four choices to be action.

1. Pay the outstanding notice
2. Enter into an instalment arrangement to pay the debt
3. Appoint a Voluntary Administrator
4. Appoint a Liquidator

There are no extensions to the 14 day period allowed under the Notice.

Even if you are negotiating a payment arrangement with the ATO and that is not concluded within the 14 days – you will assume personal liability for the company debt.

Your assets are at risk and you must act urgently if you believe you have received a Director Penalty Notice.

Many of the directors that engage Liquidation Direct to undertake a Creditors Voluntary Liquidation have received a Director Penalty Notice.

If your company is in financial hardship and you suspect the tax office may issue a Director Penalty Notice, or if you have just been served the notice, you cannot wait – you need to act now and seek professional insolvency advice.

The advice Liquidation Direct are able to provide covers corporate insolvency such as Voluntary Liquidation, Official or Court Appointed Liquidation, Voluntary Administration and also personal insolvency including Bankruptcy and alternatives to Bankruptcy including Debt Agreement – Part IX and Personal Insolvency Agreements – Part X of the Bankruptcy Act.

Call 1300 767 525 for free and confidential insolvency advice – 24 hours/7 days