The DPN (Director Penalty Notice) regime was extended by legislation passed on 5 February 2020 so that now, a director can be held personally liable if the company has not met its GST obligations, in addition to the pre-existing liability of directors for unpaid company PAYG (pay-as-you-go) withholding and SGC (superannuation guarantee charge) obligations.
The DPN regime encourages directors to ensure that companies meet their obligations for PAYG taxation, superannuation, and GST to avoid being personally hit by a DPN and any associated penalties. Most company directors should have nothing to worry about, however, as the regime is intended by Government to address historical under-reporting, significant unpaid ATO debt, and suspicious phoenix activity.
Anyone considering becoming a director of an existing company also needs to know that they can be held personally liable for historical liabilities that remain unpaid or unreported within three months or more of their appointment.
If you have any questions about the DPN regime and your situation as a company director, or about company GST, PAYG, or SGL obligations, talk to Geoff Morris as soon as possible.
ATO example of phoenix behaviour indicators
Sebastian and Henry are directors of a company, KeenOne Enterprises Pty Ltd, which provides a luxury goods sales assistance service. The company was registered on 1 July 2018 and has an ABN and a tax file number. Monthly BAS were lodged within due dates for the 2018-19 year, some resulting in a refund being paid to the company, other resulting in GST liabilities. The company has not lodged any BAS since. ATO data indicates that the company does not employ staff, however three individuals (unrelated to Sebastian and Henry) have lodged their 2019-20 income tax returns showing employment income from the company and claiming credits for income tax withheld by the company.
The 2018 company tax return shows significant income but with an overall loss. The director payments disclosed in the company tax return have not been declared as income by the directors as they have not lodged their personal income tax returns either.
BAS lodgment reminders have been sent to the company and the directors. Attempts to contact the directors have not been successful. Third party data indicates that the company bank accounts are being drawn down; ad hoc withdrawals of amounts under $10,000 commenced in July 2019 and have been increasing in size and frequency since.
A check with the Australian Securities and Investments Commission shows that Sebastian and Henry have recently registered a new company, Keen2Go Enterprises Pty Ltd, with the same business address as KeenOne Enterprises Pty Ltd. Further checks show that the new company has just applied for an ABN and GST registration. In this scenario, there are reasonable indicators of phoenix behaviour. The Commissioner uses the estimates regime to estimate the PAYG withholding, SGC and GST liabilities of the company for periods after the last BAS was lodged.