With the recent collapse of some high profile businesses, it is a good time to review the personal obligations that can fall on a company director to pay certain tax debts of the business.
Director Penalty Notices:
When a company fails to pay the superannuation contributions for its employees or the PAYG withheld from its employees’ wages, the ATO can recover those debts from the company directors personally. They do this by issuing a Director Penalty Notice (DPN). A DPN outlines the unpaid amounts and if there are any options to have the penalty remitted.
Directors receiving a DPN have only 21 days to pay the debt or to apply for remission by putting the business into the hands of an Administrator or by commencing to wind up the company.
If the PAYG withholding tax or super contributions have not been reported to the ATO within 3 months of the original due date, then there is no option for remission and the Director must either pay the debt or the ATO will initiate legal proceeding to recover the debt.
Directors take note:
When a business is experiencing financial trouble, it is often seen as a better option to ignore lodging BAS returns as the amount of ATO debt will just become larger. However, by doing this, a Director can put their own personal assets at greater risk if they become no longer eligible for remission by acting to put the business into Administration.
If you feel that this may apply to you or to your business, it is best to seek help before the ATO act. We can assist you with your lodgements to keep you up to date and help you manage your cashflow.
More information can be found on the ATO website