The Director Penalty Notice (“DPN”) regime poses a significant risk of personal liability to company directors for unpaid PAYG tax debts and Superannuation Guarantee Charges. In years past, company directors have been able to avoid the operation of a DPN by placing their companies into voluntary administration or liquidation. The opportunity to do so has now been limited by the introduction of lock-down DPNs and a different approach must be taken.
Steps to be taken now
In order to manage the risk of personal liability, company directors should consider taking the following steps as soon as possible:
- ensure their residential and business addresses are correctly recorded with the Australian Securities and Investments Commission;
- review personal asset protection and estate planning strategies; and,
- take advice on director and officer liability insurance (ensuring that any policy covers penalties under the DPN provisions and does not contain an insolvency exclusion).
Ongoing prevention
Due to the recurring compliance obligations of company directors under the DPN regime, directors should consider establishing systems or taking the following ongoing steps to limit their risk of personal liability:
- closely and regularly monitor their company’s financial position and tax compliance status;
- review their company’s tax compliance systems and processes on a regular basis;
- ensure all outstanding lodgments are made on time and any outstanding lodgments are brought up to date on an urgent basis;
- review employment and subcontractor arrangements, ensure proper classification and make certain that appropriate PAYG and SGC amounts are withheld and paid;
- ensure that PAYG installment activity statements and SCG statements are lodged on time, even if their company cannot remit the amount required under the statements, thus preventing the issue of a lockdown DPN and preserving the option of appointing a voluntary administrator or liquidator to avoid personal liability;
- seek urgent advice and take prompt action if their company is not paying or is unable to pay its PAYG and SGC liabilities as and when they fall due.
Breene & Breene, Solicitors regularly advises and acts for company directors in insolvency, asset protection and ATO matters. If you are concerned about your personal liability as a company director, contact us today for tailored professional advice.
