Do you know that in some circumstances, the Australian Taxation Office (ATO) can make a director of a corporation personally liable for some of the company’s tax and other liabilities? We are discussing liabilities related to the non-payment of Pay as You Go (PAYG) withholding, net GST, and superannuation contributions. 

Under certain situations, the ATO can make the director liable without them having ever signed a personal guarantee or similar agreement towards the ATO. The subsequent question is – what are these circumstances? Preferably, directors should work to avoid being in this position. If these amounts are not lodged with the ATO within three months of their due date, and the ATO issues the director with a Director Penalty Notice (DPN), the only way for the director to clear the DPN is to pay the amounts. 

If the company is unable to afford to pay these amounts but the lodgements have been completed within the three-month period, the director is fortunate to have more options to remove the DPN. These remedies include payment, but also include the ability to place the company into voluntary administration, liquidation, or appoint a Small Business Restructuring Practitioner. Any of those can help the director escape the DPN.

There is a slight alternative to this concerning Superannuation Guarantee levy. As you may be aware, in the event that this is not paid on time to the workers’ superannuation funds, it must then be remitted to the ATO plus any administrative costs and interest the ATO may impose. Thus, with Superannuation Guarantee levy, this must be lodged by the due date in order for the director to have those supplementary remedies just discussed. If it’s not filed by the due date, then the sole way a director can eliminate a Director Penalty notice associated with Superannuation Guarantee levy is to pay it. 

Now, should you obtain a director penalty notice and some of the other choices other than payments are available to you, you generally must take one of those steps within 21 days of obtaining the notice. So, if you ever obtain a notice called Director Penalty Notice or DPN, immediately act on it, either by reaching out to a liquidator or a lawyer. Just urgently act on it to give yourself as many alternatives as possible for handling it. On the other hand, the preferable suggestion is to make sure you submit those lodgements on time for your company, even if your company cannot afford to pay it, as that affords you more options down the line if the ATO attempt to pursue you personally.