Payday Super And Director Penalty Notices, Understanding The Changes

A guide to director penalties for unpaid superannuation – what it means for voluntary disclosures and personal liability.

1. The director penalty regime

If a company doesn't pay its PAYG withholding, GST¹ or superannuation² on time, a director becomes personally liable for a penalty (“director penalty”) equal to that debt under Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA).

A common misconception is that personal liability is imposed by the Australian Taxation Office (ATO) when it issues a Director Penalty Notice (DPN). This is not the case – personal liability is imposed automatically by operation of law as soon as the company fails to pay the debt on time³. The DPN is simply the precondition the ATO must satisfy before it can recover the director penalty from a director personally – that is, the ATO cannot take steps to recover the penalty amounts from a director until 21 days after they issue a DPN⁴.