ARTICLE · 06 APRIL 2022

Director penalty notice regime affected by major change

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Directors be aware and beware.

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DIRECTORS BE AWARE AND BEWARE.

As discussed in our previous On The Pulse articles, most recently in Alex Siu's "Tax Debts Arising from ATO Audits", the ATO can issue one of two types of DPN to make a director personally liable for a penalty equal to the value of a company's overdue SGC, PAYG, and GST. These are a non-lockdown DPN, issued when statements are lodged (within three months of the due date) but debts aren't paid; and a lockdown DPN, issued where statements have not been lodged (within three months of the due date) and debts are unpaid.

However, a major change has resulted from the recent Federal Circuit and Family Court of Australia decision in Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5. It found that entering into a payment arrangement does not cause a tax debt which is due and payable to cease to be due and payable. This negatively impacts the non-lockdown DPN options to remit personal liability.

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