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Many business owners believe company debts stay with the company.
In some cases, this is not correct.
Under the Director Penalty Notice (DPN) rules, directors can become personally liable for certain unpaid company tax debts.
This is an area where we are seeing increased ATO activity.
A Director Penalty Notice is issued by the ATO when a company fails to meet certain tax obligations.
These can include:
If action is not taken, the ATO may pursue the director personally.
Many situations follow a similar pattern:
By the time advice is sought, options may already be limited.
The key issue is often not the debt itself, but failure to lodge returns on time.
Even if a company cannot pay its tax debt, lodging returns on time usually keeps more options available.
If lodgements are significantly overdue, directors may lose the ability to:
This is why lodgement compliance is critical.
Common risk indicators include:
• ATO payment plans constantly being renegotiated
• Super falling behind
• BAS not lodged
• Ignoring ATO letters
• Cashflow pressure increasing
These situations should be addressed early.
Directors should consider:
• Keeping lodgements current even if payment is difficult
• Monitoring ATO balances regularly
• Seeking advice early if pressure develops
• Reviewing cashflow forecasts
• Communicating with advisors early
Early engagement usually provides more flexibility.
We are seeing:
The ATO now has stronger data visibility than in previous years.
Most DPN situations we assist with could have been managed earlier with simple intervention.
Often the biggest mistake is waiting too long.
Directors who act early usually have more pathways available.
Company tax debts can become personal debts.
Lodgements matter just as much as payments.
If you are concerned about company tax debts, outstanding lodgements or ATO pressure, we can review your position and discuss available options.
Early advice usually provides more flexibility.
This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.