What is a Director Penalty Notice?
If you are a director of a company, even if you do not have anything to do with the day to day running of the company, you should be aware that the Australian Taxation Office is able to pursue you as an individual for certain company debts including Pay As You Go withholding tax and Superannuation Guarantee Charge.
Before the Australian Taxation Office can commence proceedings against you personally, they must issue a Director Penalty Notice and send it to you.
The Director Penalty Notice causes a director to have personal liability for the debt referred to in the Notice if you do not take action within 21 days of the date of the Australian Taxation Office’s letter.
I have received a Director Penalty Notice, what do I do now?
The first thing you must do when you receive a Director Penalty Notice is contact your solicitor immediately. Consulting a solicitor as soon as possible may help to reduce a director’s exposure to being personally liable and subsequently defending legal proceedings by the Australian Taxation Office.
Compliance with Director Penalty Notices
You can comply with the Director Penalty Notice by paying the debt, or if your company is experiencing financial difficulty, by appointing an administrator or liquidator to the company.
Please note that this must be done within the 21 day period. If you do not take the appropriate steps to comply with the letter within the 21 day period, the Australian Taxation Office may commence proceedings against you to recover the debts.
There are certain defences that are available to a director in such a proceeding including:
- You had an illness that prevented you from participating in the management of the company; or
- If you took all reasonable steps to ensure compliance with the notice.
Directors of companies must be ever vigilant in ensuring that the company’s obligations are being met with the Australian Taxation Office. Paying attention to PAYG withholding tax and superannuation contributions are important and a director must ensure that these debts are paid by the company on time. It is important to consult with your lawyer and accountant if you are experiencing difficulties in these areas.
ABKJ Lawyers can assist you if you have received a Director Penalty Notice. Please contact our office should you have any questions about any of the information in this article or Commercial Law in general.