ATO Issuing More "Director Penalty Notice Warning Letters"
One year and two days after the first batch, the ATO have started issuing more Director Penalty Notice Warning Letters.
Practically identical to the notices issued a year ago, these new notices still don’t inform directors of all options available to them.
The letters warn of possible personal liability if company directors don’t take action.
The only options they present are:
1. pay the outstanding amount, or
2. enter a payment plan.
But there are two main things the ATO doesn’t mention in their letter.
Firstly, Payment Arrangements are becoming much harder to get! The ATO will often want to see financial statements and are seeking guarantees to back the arrangement. These requirements can be a deal breaker for many directors.
Secondly, the other big option the ATO has left unsaid, is that there are formal insolvency options that also work to prevent personal liability under a DPN.
If your client received one of these warning letters, your first question to consider is: Were the debts properly reported? That is, did the company lodge it’s BAS statement (for PAYG or GST), or Superannuation Guarantee Charge Statement within 3 months of the due reporting date? In all cases we discussed from the first batch of warnings, the answer was yes. If the answer is yes, they have options other than those stated in the ATO letter.
If the debt was properly reported, we can prevent personal liability under the DPN by putting the company into:
- Liquidation – For companies that no longer trade or need to close
- Small Business Restructuring – For companies with total debt under $1 million, that want to continue by forming a deal with creditors. This option allows directors to stay in control of the company
- Voluntary Administration – For companies with total debt over $1 million, that want to continue by forming a deal with creditors.
Please feel free to pass our number on to your clients, or we are happy to have a conference call with you to discuss their individual needs.