16 March 2022 by Peter Krejci
Payment arrangements no longer part of the plan and appointment of a Small Business Restructuring Practitioner (SBRP) included.
Director Penalty Notices
The ATO suspended most overdue tax collection during the COVID-19 pandemic however, it has recently recommenced collection activity. This includes the issuing of DPNs.
Under the DPN regime directors become personally liable for a penalty equal to the value of certain company tax obligations, including superannuation, PAYG withholding and GST, if they are not paid when due. Prior to commencing proceedings to collect these amounts, from a director, the ATO must first issue the director with a DPN.
The options available to a director when they receive a DPN depends on the type of DPN. The two types of DPNs are briefly summarised below:
1. A ‘Non-Lockdown’ DPN, may be issued where:
- a company has lodged business activity statements (BAS) and instalment activity statements within three months of the due date; and
- has lodged superannuation guarantee charge (SGC) statements within one month and 28 days after the end of the quarter that contribution relates to; but
- has not paid the relevant amounts owed.
2. A ‘Lockdown’ DPN, may be issued where a company has not lodged their BAS or SGC statements within the timeframes referred to above and have not paid the relevant amounts due.
Directors that receive a ‘Non-Lockdown’ DPN can avail themselves of one of the options set out in the notice within 21 days to avoid the penalty, the options available to a director are now:
- the company complies with its obligation to pay the unpaid amount to the ATO;
- the company goes into administration.
- the company appoints an SBRP; or
- the company goes into liquidation.
The SBRP option has now been included. Set out below is a brief summary of the SBRP process.
The option for the company to enter a payment arrangement has been removed. Significantly, this means that directors can no longer avoid personal liability for a penalty under a Non-Lockdown DPN by causing the company to enter a payment arrangement in relation to the outstanding liability within the 21 days.
The removal of the payment arrangement option, from the regime, will result in more directors who receive DPNs placing their companies into administration or liquidation or appointing an SBRP.
SMALL BUSINESS RESTRUCTURING - AN OVERVIEW
- Less than $1m in liabilities, employee entitlements and tax reporting obligations are up to date;
- SBRP does not manage the company’s business;
- Debtor in possession model i.e. the director/s maintain control and continue to trade the business;
- SBRP is a streamlined and cost effective debt restructuring process.
Please contact BRI Ferrier if you are concerned about your tax debt or require assistance with debt restructuring.