The proposed changes to the current Director Penalty Notice
("DPN") rules were postponed following the sudden
withdrawal of the Bill from Parliament.
This means that directors will continue to enjoy the 21 day
notice period for DPNs before suffering personal liability.
However, the proposed changes have a sense of inevitability and
directors should be alert to the risk of being personally liable
for debts owed by the company.
Director Penalty Notices are notices issued by the Australian
Taxation Office ("ATO") to collect outstanding tax debts
owed by the company which make directors personally liable if the
company does not fulfil its obligations.
Under the current DPN regime, company directors will only be
personally liable for paying outstanding PAYG taxes if the company
fails to pay the taxes, or does not appoint an insolvency
practitioner within 21 days of the issue of the notice.
The proposed changes under the Tax Laws Amendment (2011 Measure
No. 8) Bill ("the Bill") aimed to substantially increase
the powers of the ATO and director's personal liability for a
portion of the company's unpaid taxes by:
making directors personally liable for unpaid Superannuation
Guarantee Charge ("SGC") obligations; and allowing the
ATO to waive the 21 day notice requirement under a DPN where the
company has unpaid liabilities that have not been reported and paid
for three months after their due date.
The impact of waiver of notice
The waiver of notice requirement under the Bill will have the
effect of widening the scope of the DPN regime as the ATO would be
able to commence immediate action where PAYG and/or SGC taxes
remain unpaid for more than 3 months.
Under division 269-25 of the Tax Law Amendment (Transfer of
Provisions) Act 2010 (Cth) company directors are entitled to 21
days to take action regarding their personal liability for their
company's unpaid debts. In DCT v Meredith  NSWCA 354 the
Court confirmed that the 21 days time frame commences when the
notice is posted to the director.
What this means for Directors
The overall effect is that the scope of personal liability for
directors will be significantly expanded if the Bill is passed in
We recommend that directors ensure they stay up-to-date with
their company tax issues and superannuation contribution
obligations, and assess their asset protection arrangements if
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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