What if my company pays the debt and is then liquidated?

If a company pays the Debt in Full, it would seem the most obvious way of complying with a Director Penalty Notice but even this strategy has its risks.

If a company pays a tax debt pursuant to a Director Penalty Notice and is later placed into liquidation, the liquidator will scrutinise all payments made to creditors in the six (6) months before liquidation and may attempt to clawback any unfair preferences.

Payments made by a company following the receipt of a Director Penalty Notice may be considered preferential and able to be clawed back by liquidators.

If the liquidator takes action to recover such payments made, the ATO can in response, seek the reimbursement of any moneys they are forced to disgorge from the directors personally.

This means your personal assets are at risk.

Accordingly, it is essential that before any payments are made the directors determine, with a high level of confidence, that their company will remain solvent for the foreseeable future otherwise, the payment of a debt may just rebound on the directors personally.