No clear guidance, no room for delay: M\managing lockdown DPN risk under Payday Super

Under the former regime:

• Employers that failed to pay superannuation were required to lodge an SGC statement within one month of the due date.
• There was a clear and understood reporting framework.
• Directors knew what action was required to preserve their position.

Under Payday Super:

• SGC Statements have been replaced by voluntary disclosure statements.
• There is no clear guidance on how VDS lodgments will be treated for DPN purposes.

As a result, key uncertainties remain:

• What constitutes timely reporting for DPN purposes.
• Whether a VDS must be lodged within a specific time frame to avoid a lockdown outcome.
• How delayed VDS lodgements will impact DPN classification.

Our preliminary view is that Payday Super may accelerate directors' exposure to Lockdown DPN, with personal liability potentially arising as early as 60 days after wages are payable, or sooner if the ATO issues an estimate of the company's superannuation liability. Until further guidance is issued, directors should assume that delayed disclosure may significantly increase their personal exposure.

Practical considerations for directors

• Single touch payroll (STP) visibility does not necessarily equal DPN reporting

Directors should not assume that STP satisfies the reporting requirements relevant to DPN classification. While STP provides real-time visibility of payroll liabilities, there is no clarity in the legislation to confirm that it constitutes formal disclosure for DPN purposes. A VDS should still be treated as necessary to mitigate potential lockdown DPN risk.

• Uncertainty does not remove the need to act

Directors should be cautious about assuming that the prior SGC reporting time frame will carry across to the new VDS lodgement deadlines. Until further guidance is available, a prudent approach is to disclose any unpaid superannuation liabilities and lodge a VDS promptly once it becomes apparent that payment cannot be made on time.

• The practical risk of delayed disclosure

Where superannuation cannot be paid, there is often a tendency to defer lodgement while cash flow issues are resolved. In practice, deferred action can become no action, particularly as payroll cycles continue and priorities shift.

Under Payday Super, this risk is amplified. More frequent payroll cycles increase the likelihood that intended disclosures are overlooked.

As a practical rule, directors should consider lodging a VDS within one week of payroll processing where there is no reasonable expectation that the superannuation liability will be paid.

Practical steps to mitigate DPN risk

In the absence of clear guidance, a conservative and transparent approach is the lowest risk course of action.

Where there is no reasonable expectation that superannuation will be paid within the required time frame, lodging a VDS shortly after payroll processing rather than waiting weeks or months will:

• Reduce the risk of a lockdown DPN.
• Ensure the liability is formally disclosed.
• Assist in minimising late lodgment penalties.
• Avoid the operational risk of missed reporting.

Importantly, it aligns with a long-standing principle of the DPN regime: taxpayers who are transparent with the ATO are generally better placed than those who delay disclosure or fail to disclose at all.

Proactive management remains critical

Payday Super increases transparency around superannuation compliance and places greater emphasis on timely reporting.

While the interaction between VDS lodgements, STP reporting and lockdown DPN exposure remains uncertain, one principle remains clear: Directors should act proactively and avoid relying on assumptions about how the regime may ultimately operate.

If the inability to meet Payday Super obligations is due to sustained trading losses, Director exposure may at some point extend beyond DPNs, to personal guarantees and Liquidator claims for insolvent trading claims and breaches of directors’ duties. Obtaining professional advice early can assist directors to understand these risks when evaluating available options to restructure or wind down the business operations.

Cameron Crichton is a partner, and Virginia Lao is a manager, at WCT Advisory Group.