The Australian Taxation Office (ATO) is beginning to return to “business as usual” and eschewing the soft approach taken during the pandemic when it comes to the collection of debts.
For a taxpayer which is a Company, the ATO can pursue the directors personally for certain outstanding debts. The ATO can issue a director penalty warning notice. This provides a director with notice of 21 days in which to take action on their outstanding debts or face ATO penalties.
These debts may relate to GST, PAYG withholdings or a Superannuation Guarantee Charge. If the director fails to take the required action within the specified timeframe, the ATO may issue a Director Penalty Notice (DPN).
At the end of March 2022, the ATO issued 50,000 director penalty warning notices. Please refer to our earlier blog “ATO Ramps Up Debt Collection Activities”.
A Director Penalty Notice (DPN) is a formal notice which the ATO sends to a company director, which can make the director personally liable for the company’s tax debts.
To avoid personal liability a director can:
- pay the debt(s);
- put the company into liquidation or voluntary administration; or
- appoint a small business restructuring practitioner.
During the pandemic, the ATO was generally supportive of formal debt restructuring proposals (such as small business restructuring or voluntary administration) as it recognised the financial struggle facing some businesses. However, the increase in the volume of director penalty warning notices issued, may signal an end to the ATO’s “light touch approach” when it comes to debt collection, particularly as the economy continues to rebound from the effects of COVID-19.
Taxpayers experiencing difficulties in meeting their ATO obligations should contact their tax agent for assistance.
Please contact us to find out more. The team at EMspire Advisory are experienced accountants, bookkeepers and tax agents in Sydney.
Please note that this information is not specific and is general in nature and cannot be relied upon as advice. Please contact us for specific advice for you and your circumstances.