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Guide to a Director Penalty Notice (2022 Update)

The Australian Tax Office (ATO) launched its debt recovery process in March 2022 by sending Director Penalty Notices to firm directors who had not met or disclosed their tax obligations. The ATO issues Director Penalty Notices (DPN) to company directors to collect debts. This covers any underpaid, unreported, or fraudulently reported contributions and debts. These are some of the most common indications that a business is in danger of going bankrupt. Here’s a Guide to Director Penalty Notice to foresee what’s coming for you and what’s best for you.

Why would the ATO send me a Director Penalty Notice?

The ATO issues a Director Penalty Notice. A Director Penalty Notice may be issued to any taxpayer who is not making a concerted effort to resolve their unpaid tax obligations and overdue lodgements with the ATO.

If the business is unwilling to cooperate with the ATO to find a solution, the ATO can send a Director Penalty Notice. If directors have not followed through on the agreed-upon payment schedules they made with the ATO or have simply done nothing to pay off the company’s tax burden; they may be given a DPN.

What are the various kinds of director penalty notices?

24-Hour DPN

The DPN, as the name implies, provides company directors with 21 days to act in compliance with tax payments owed. It is the most typical sort of DPN issued, and directors can protect themselves from personal liability by taking any of the following actions:

  • Make sure the business settles the debt by the specified deadline.
  • Set up a payment plan with ATO to repay the obligation.
  • Put the business under voluntary administration.
  • Put the company into liquidation.

It is crucial to remember that the 21-day window starts on the issue date—not the day the DPN was received—as mentioned in the document. The ATO may take legal action against directors individually if they don’t comply.

DPN lockdown

The ATO has just begun issuing lockdown director penalty notices. They are given to directors whenever a company doesn’t meet the requirements for lodgement. The term “lockdown” refers to a DPN’s penalty that can only be satisfied by full debt payment.

To whom does a Director’s Penalty Notice apply?

The ATO will send a director penalty notice to each company’s directors. A director penalty notice may also be issued in specific circumstances to a former director who served as a director when the business generated the tax obligation.

How can you prevent getting a Director’s Penalty Notice?

Developing good habits is the simplest way to prevent receiving a Director Penalty Notice. This will guarantee that the business pays its tax obligations on time, preventing notices from being issued.

  • Financial Position: As a director, you must constantly be informed about the company’s financial status. If your business is struggling to meet its financial obligations, it’s possible that tax obligations aren’t being fulfilled by the deadline.
  • Tax Commitments: This includes keeping an eye on GST and PAYG withholding. Directors should also make sure that paperwork like the quarterly BAS and IAS is submitted on schedule.
  • Company Information: The ATO must constantly have the most current information about the company, including its address and contact information. This is essential since the justification for not receiving a warning is unacceptable.
  • Be Proactive: If a director notices that the business cannot meet financial obligations such as PAYG withholding, it is their responsibility to take action, including hiring experienced business advisory services.

We at CRS Insolvency Services Australia specialize in assisting under challenging circumstances, such as Director Penalty Notices. Call us at 1800 210 073 to learn more about personal and corporate insolvency.

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Alternative Options to Bankruptcy

Alternative Options to Bankruptcy

Bankruptcy is not always the most appropriate option for some people and the alternatives should be carefully considered before filing for bankruptcy.

There are two common alternatives, debt agreements and personal insolvency agreements. These share some of the same features, including:

  • Affordable payment plans which bundle all unsecured debt repayments into one monthly payment
  • Flexible time periods
  • Protection from bankruptcy.

Some people need some flexibility and the ability to negotiate how much they can pay and how long they would like to perform the payments. However, there are some differences that need to be taken into consideration. Here are the basic requirements for the two alternatives.


These are available for those who earn less than $99,958.95 before taxes and owe less than $133,278.60 to creditors combined and own assets less than $266,557.20 are eligible to apply for a debt agreement.

Specifications for a Debt Agreement

Individuals who apply for a debt agreement must acknowledge that their name will be listed in a National Insolvency database, also known as the NPII. Additionally, credit will be impaired for at least five years. This will also go on record as an act of bankruptcy.

Specifications for a Personal Insolvency Agreement

All assets will be controlled by a Controlling Trustee while the proposal is being considered by creditors. Like with a debt agreement the individual will be listed on the NPII and their credit will also be affected for five years. Whilst subject to a Personal Insolvency Agreement people cannot manage a corporation and act a director.

For more information regarding your alternatives, contact CRS Insolvency Services for more information. Please call 1800 210 073.

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Why Your Company Needs an Independent Business Review

Why Your Company Needs an Independent Business Review

Independent business reviews provide clear insights and information that help business owners to make changes for the future. These alterations can help improve profitability, expansion efforts, and other challenges they previously have faced. If you’re unsure if you need one, here are some reasons that you might consider requesting an independent business review.

Require Insight Into Further Capital Investments

If you are considering expanding your company or finding additional funding, an independent business review might be an excellent option for you. With this report, you can find out if you are in a good position for further capital investment or if you need more time to prepare for your next move.

Understand the Financial Situation and Results

If you are unsure why your company is performing the way it is, an independent business review can give you the understanding you need. You will be able to look at cash forecasts, business plans, future assumptions, and even see your future outlook. It will help you figure out why you might not be as successful as your firm hoped!

Concerns for Non-Compliance

Remaining compliant is essential to staying successful. If you want to check your compliance, it is best to do an outside party overseeing your business activities. It is unlikely you would find some of the same issues as you are seeing them regularly. With an independent review team, they are looking at your business operations for the first time!

Who Can Provide an Independent Business Review?

If you feel that an independent business review is in your future, contact CRS Insolvency Services at 1800 210 073. We would be happy to assist you with conducting a thorough report to provide you with the tools for future success.

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How Does Liquidation Affect Shareholders?

How Does Liquidation Affect Shareholders?

Liquidation is the process of finalising of a business’s finances and valuable assets prior to permanently closing. There are many reasons a company might choose to liquidate. Shareholders are affected by liquidation just like other associated parties.

What Happens to a Business that Cannot Pay Debts?

In the process of liquidation, businesses can be deemed insolvent. Insolvency means that the company is unable to pay their debts. With insolvency, the company has to follow on a specific path to pay its debts.

The Process of Liquidation for Insolvent Companies

If a business is insolvent, there is a specific method of paying off certain parties. All classes of creditors have to be paid their debts, which leaves shareholders receiving compensation last.

It is unlikely that shareholders will receive any form of compensation or payment when a company liquidates. Often, companies have significant debts and cannot pay their shareholders following the completion of their liquidation.

What Can Shareholders Do If This Happens?

Companies are not obligated to share financial details if a company chooses to liquidate due to being insolvent. Shareholders have access to these files and can inspect records if they contact the firm beforehand.

A capital loss can be reported if the company finalises liquidations and possibly writes an insolvency notice stating that no funds distribution will be allocated to shareholders.

Options for Shareholders

If you would like more information on the impact of liquidation to shareholders or what options are available to reduce financial distress to your company, please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24-hour advice hotline on 1800 210 073.

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What Are My Responsibilities Once I Declare Bankruptcy?

What are my responsibilities once I declare bankruptcy?

While bankrupt, you will become subject to some legal obligations. In this article, we provide an overview of what these obligations are.

Borrowing Money

If you are taking out a loan, purchasing anything on credit or incurring credit through any other way which exceeds a prescribed amount, you are legally obligated to tell the person you are taking credit from that you are currently an undischarged bankrupt.

Running a Business

While bankrupt, you can still operate a business. However, you must disclose your bankruptcy status if you are trading as a sole trader or in a partnership. You will not be permitted to become director of a company or be involved in managing the company without Court permission.

Name and Address Changes

If you decide to change your name or your address, you are legally obligated to notify your bankruptcy trustee.

Overseas Travel

Similarly, if you would like to travel overseas, written approval must be given by your trustee.

If you are experiencing financial distress, please contact CRS Insolvency Services to speak to one of our professional consultants today on 1800 210 073. Our toll-free hotline is open 24 hours a day, 7 days a week to assist you with any questions relating to bankruptcy.

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Do employees get paid when a company goes into liquidation?

Do employees get paid when a company goes into liquidation?

If a company is unable to pay its debts when they are due, the business could enter into voluntary liquidation. Liquidating the company will affect all stakeholders, however employees, in particular, will be concerned about their jobs and whether they will be paid for the work they have already completed.

The federal government operates a scheme called the Fair Entitlements Guarantee (FEG), which is a final resort protection measure for employees. The FEG enables eligible employees to claim unpaid wages, unpaid annual leave and other entitlements. If there are funds available, employees may also be paid the proceeds from the liquidation.

What does the FEG allow employees to claim?

Under the FEG, employees who are eligible can claim:

● Unpaid wages for up to 13 weeks;
● Annual and long-service leave;
● Pay in lieu of notice for up to 5 weeks; and
● Redundancy pay for up to 4 weeks per year of service or on a pro-rata basis for less than 1 year of service if the employee’s contract or other legal instrument allows for it.

The FEG does not enable employees the right to claim superannuation, reimbursement payments or one-off, irregular payments. Similarly, no bonus payments or commissions will be paid.

Who is eligible for FEG?

To be eligible for FEG, the following criteria apply:

● The employee’s end of employment was due to the company’s insolvency; or
   ○ Occurred less than six months before the appointment of an insolvency practitioner; or
   ○ Occurred on or after the appointment of an insolvency practitioner.
● The employee is actually owed the employment entitlements they are claiming and lodged the claim within 12 months of either: losing their employment, the date of liquidation or insolvency.
● The employee has taken reasonable steps to prove these debts during the liquidation.
● The employee needs to be an Australian citizen or permanent resident or hold a category of visa which allows them to stay in Australia at the time they lost their employment.

Generally, contractors will not be permitted to claim their employee entitlements, although some exclusions apply for some textile, clothing and footwear contract outworkers. In addition, directors of the company and their relatives will be ineligible for these claims. Other eligibility exclusions may apply.

If you would like to learn more about employee entitlements after a company goes into liquidation, please speak to CRS Insolvency Services on 1800 003 883. We offer free, confidential advice on our 24/7 toll-free hotline to help reduce financial distress to businesses.

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Bankruptcy: Am I Eligible?

Bankruptcy: Am I Eligible?

There are two requirements you must meet to apply for bankruptcy:

1) You cannot pay your debts on time (insolvent) and;
2) You are currently in Australia and either live or have a business connection to Australia.

You do not need to have a minimum or maximum sum of debt or income to be eligible for bankruptcy. There is no fee to apply for bankruptcy.

If you are in a debt agreement and would like to apply for bankruptcy, contact the administrator of your debt agreement. You are required to end the debt agreement before declaring bankruptcy.

Ensure that you are aware of the full consequences of bankruptcy before you apply. These include:

● A trustee will manage your bankruptcy and work with you and your creditors to achieve a fair and equitable outcome for all. You have a legal obligation to provide information to them such as bank statements.
● You have some restrictions on employment and whether you can run a business. If your income is over a certain amount, you will need to make payments to your trustee.
● Bankruptcy does not cover all debts. There are some exceptions.
● You need permission from your trustee to travel overseas.
● Your name is listed on the National Personal Insolvency Index (NPII) permanently.
● Obtaining credit in the future will be impacted. You must report your credit provider for a certain time period.
● Your trustee can sell your assets.
● It is possible that you lose the right to take legal action.
● Your bankruptcy will usually last for 3 years and 1 day from the day you file the Bankruptcy Form.

Read here for more on the consequences of bankruptcy.

If you are facing financial issues or want more information on insolvency and bankruptcy contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice.

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Impact of COVID-19 Insolvency Relief Measures: Insolvency and Winding Up Applications at All-Time Low

The temporary relief to insolvency laws and roll out of stimulus measures to offset the economic impact of COVID-19 has had a drastic impact on the number of insolvencies and winding up applications to the Australian Tax Office (ATO).

Attributed to ATO adopting a sympathetic approach with the COVID-19 pandemic, opting to focus on business support measures rather than recovery procedures, the ATO did not file any winding up applications in July or August 2020. The effect of the insolvency laws has been consistent since the wake of the pandemic, with April 2020 only recording a mere seven court applications.

When comparing July to August 2020 and July to August 2019, winding up applications are down by 89% and court liquidations are down 74%. This similar trend is also seen with Voluntary Administration and Voluntary Liquidations, down 62% and 37% respectively.

Whilst the number of winding up applications have hit an all-time low, experts warn that the COVID-19 insolvency relief measures may cause a domino effect of business shutdowns after the legislation is scheduled to end on September 25th. Whilst the government has extended some economic relief measures, such as revamping the JobKeeper program to have it extended to March 2021, there is still debate as to whether it would be appropriate to extend the regulatory shield on insolvency laws beyond September 2020.

If you would like more information on the temporary relief measures put in place or what options are available to reduce financial distress to your company then please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.

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How Covid-19 Has Changed The Retail Industry

With the pandemic taking a massive hit on the consumer and retail industry we can see retailers scrambling to adapt. Bricks and mortar stores faced the biggest hit due to the significant shift towards online shopping.

What does the short term look like?
Some retailers have seen demand fall and customers shift channels whereas others face sudden spikes in demand. Being able to predict and manage demand has never been more important, particularly when managing your supply chain.

Retailers have also been looking into crisis management planning and ways to protect their employees whilst maintaining business as usual.

What does the future of retail look like?
With the shift in consumer behaviour to impact the long term, retailers are revising their immediate and long term strategy. With online shopping becoming the new norm, many are redesigning their businesses to ensure the same customer experience in-store can be applied online. This may include an emphasis on digital marketing and UX design, or the use of Virtual Reality and Augmented Reality to simulate an “in-store” experience.

Increasingly, businesses are also opening up “dark stores”, which are stores without customers, to ensure quicker pickup and dispatch of online orders. Ultimately, retailers that are not able to future-proof their businesses and adapt to the new normal may get left behind.

If you would like more information on company liquidations or how to restructure your business to reduce financial stress then please contact CRS Insolvency Services. Our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

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Restructuring Your Company: 3 Business Trends Emerging From COVID-19 You Should Know

The duration of the pandemic remains unclear with some Australian states preparing for a potential second wave. However, undoubtedly the pandemic has altered life for everyone, this being reflected in the new emerging trends and practices of business. Restructuring your business to adapt to these emerging trends will be crucial to your long term survival and success. Below are examples of some trends that businesses should be aware of:

More flexible work arrangement and working from home

An increased amount of businesses will likely embrace remote work for the long term. As businesses have now seen first-hand that working from home and flexible working arrangements may not necessarily mean reduced productivity, it is more likely that companies will continue to allow segments of their employees to work remotely.

Everything moving online (E-Commerce)

Whilst E-commerce is nothing new, from the pandemic we see emerging categories and increased options catalysed by consumer demand. With this said, customers are also demanding for faster delivery times and different shopping options at reasonable prices. If your business sells physical products, then these trends will be crucial to note down.

Focus on resilience rather than efficiency

Many companies have been focused on designing the business in a way to streamline roles, supply chains and workflow to improve efficiency. However, with the pandemic, businesses that are designed to be flexible and resilient were able to better respond and make corrective changes.

With the duration and impact of the pandemic still unclear, we recognise that this may be uncertain and challenging times for your business. If you would like more information on how to restructure your business to reduce financial distress and ensure your business is well adapted to the new ‘normal’ then please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.

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