The ATO can issue a Director Penalty Notice, known as DPN if companies have not paid their PAYGW or super obligations. DPN’s have been around for a while but these new changes, which apply from 1st April, 2019, extends the ATO’s powers, particularly in regards to unpaid employee super.
First some background….
What is a DPN?
Directors have legal responsibility for ensuring that their company meets it’s PAYG Withholding and superannuation obligations for employees.
If the company does not comply with it’s obligations, the ATO has the power to issue a DPN.
A DPN can make a Director personally liable for these company debts.
If you are ever in receipt of a DPN please ensure you take immediate action. Don’t wait – contact your lawyer, your accountant or an insolvency specialist without delay.
A DPN can take two forms – Lockdown DPN and Non-Lockdown DPN.
A Non-Lockdown DPN gives the Director 21 days to take certain actions which if taken correctly, can avoid personal liability. These options are:
- Pay the debt;
- Appoint a Voluntary Administrator; or
- Place the company into Liquidation
When can a Non-Lockdown DPN be issued:
Non-Lockdown DPN’s are issued in situations where the company has complied with lodgement obligations but the amounts have not been paid.
For example – the company has reported it’s super obligations but not paid the amount or the company has lodged it’s BAS but not paid the debt to the ATO.
A Lockdown DPN is much more serious – there are no options available for the Director to avoid personal liability – upon issuance of a Lockdown DPN the debt is due and both the Director and the Company are liable for payment of the debt.
When is a Lockdown DPN issued:
A Lockdown DPN is issued in situations where the company has not complied with it’s lodgement obligations within 3 months of the due date and the amount is not paid.
For example, a company has not lodged or paid it’s BAS for more than 3 months after the due date.
What are the 1st April, 2019 changes to DPN’s?
The changes only apply to DPN’s issued in relation to unpaid super, not PAYGW.
The changes remove the 3 month from the due date rule for super.
If a DPN is issued, a Director has no opportunity to avoid personally liability under the 3 options listed above if the super amount was not reported by the due date (28th day after the end of each quarter).
What should employer’s do?
The long and short of it is, always 1) lodge your employee super on time 2) lodge your Activity statements on time and 3) pay your employee super and PAYGW debts on time.
If you don’t and the ATO take action you may be held personally liable for the company debt.
In light of the new law, it’s clear that the Government are obviously very serious about ensuring that employers are paying the right amount of PAYGW and super for their employees.
In light of this, here is a summary prepared by our team of the most important superannuation obligations for employers that you need to be aware of.
Are there any other changes as a result of this Bill passing Parliament?
Yes. The major one is that non-payment of super can now be a jailable offence!
The major changes are:
- The ATO can now advise employees or ex-employees that it has detected non-payment of super by an employer and is now able to disclose information of any compliance or recovery actions the ATO is taking.
- The ATO can now direct an employer to pay an amount of employee super
- It is now an offence not to comply with the ATO’s direction which is punishable with a penalty of up to $10,5000 and/or 12 months imprisonment
- The ATO can direct an employer to undertake a specified education course regarding their super obligations and failure to comply with this direction can result in penalties or even jail time for repeated offences
- Single Touch Payroll has been extended to all employers including those with fewer than 19 employees from 1/7/19