A proprietary limited company structure is one of the most common structures for businesses. It offers a lot of benefits such as concessional tax rates and limited liability.
It is often thought that when a company becomes insolvent, then you can simply liquidate the company and walk away from unsecured creditors however this is not exactly the case.
A director penalty notice (“DPN”) can be served onto the directors of companies allowing the ATO to chase them personally for Superannuation Guarantee liabilities, Pay As You Go (PAYG) liabilities and now, from 1 April 2020, GST liabilities of the company.
Now there are two types of DPNs, Non-Lockdown DPNs and Lockdown DPNs.
If Superannuation Guarantee liabilities, PAYG liabilities and soon to be GST liabilities remain unpaid however they have been reported to the ATO within 3 months for PAYG/GST and within 1 month for Superannuation of the lodgement due dates, then the DPN can be remitted by:
- Paying the outstanding liabilities in full;
- Appointing an administrator,
- Placing the company into liquidation
If you get served with a Non-Lockdown DPN then you need to act on the above within 21 days of the DPN issue to receive remission (this is based on the date of the letter whether or not you have received it or not).
If Superannuation Guarantee liabilities, PAYG liabilities and soon to be GST liabilities remain unpaid and not reported to the ATO, within 3 months for PAYG/GST and 1 month for Superannuation of the lodgement due date, then the DPN can only be remitted by paying the outstanding liabilities within 21 days from the issue of the DPN.
What you need to do
- Make sure that you lodge your business activity statements as they fall due
- Make sure that you lodge and pay your superannuation guarantee liabilities as they fall due or complete superannuation guarantee charge statements and issue to the ATO
- Make sure your postal address is always up to date
If you would like more information, contact us and book an appointment to discuss your accounting needs today.