A company director is obliged to pay their employee’s Pay As You Go (PAYG) withholding and Superannuation Guarantee Charge (SGC). It is a director’s legal responsibility to ensure that these obligations are met.
However, when a director runs into financial difficulties, then it is common practice that they delay these payments to improve short-term cash flow. These payments are usually made quarterly so it takes time for people to notice that they have not yet been paid.
It is important for company directors to know that this can cause them to become personally liable for these payments. This is where a Director Penalty Notice comes into play. If you have not met your legal obligations to pay these amounts, then the Australian Taxation Office (ATO) may issue a Director Penalty Notice (DPN) to the director’s residential address as registered with the Australian Securities and Investments Commissions (ASIC). For this reason alone, it is critical that company directors always keep their residential address details up to date with ASIC, otherwise a DPN may be issued and you will never know about it!
A Director Penalty Notice carries serious consequences and so it is important that you take action immediately. You have 21 days to respond from the date the DPN was issued by the ATO and there are different steps that you can take.
- Pay the full debt; or
- Enter an installation arrangement to pay the debt; or
- Place the company into Voluntary Administration; or
- Place the company into Liquidation.
If you have received a Director Penalty Notice and fail to respond appropriately within the 21-day timeframe, then you will become personally liable for the amount stipulated in the DPN notice.
To avoid being made personally liable, then please act immediately if you have received a Director Penalty Notice. If you have received one and want professional advice about what to do, then please contact CRS Insolvency Services on 1800 210 073. Our toll-free hotlines are open 24/7 so there will always be someone available to help you.