Speaking to Accountants Daily, BDO consultant Gerry Collins said he has seen recent examples where the ATO has sent a Director Penalty Notice (DPN) to a director because he failed to lodge, therefore becoming personally liable.
However, Mr Collins said there are two strings to the DPN legislation, with different options for directors who do lodge their returns, and those who do not.
If a company lodges both their PAYG and SGC amounts within three months of the actual date for lodgement, the ATO will then give the director four options to be actioned within 21 days, including, paying the amount due; putting the company into administration; commence putting the company into liquidation; or agreeing to a payment arrangement.
According to Mr Collins, if any of the options are adopted, the director’s personal liability will be extinguished, unless the company defaults on the payment arrangement.
“If you do any of those things within three weeks then the personal liability disappears but he or she has to have lodged and the ATO is aware of the debt, and while the debt is accumulating at least it is lodged and therefore the director knows the ATO is chasing but has given him notice,” said Mr Collins.
“If the director hasn't lodged, the ATO issues a notice but the only option is to pay the debt.”
“I think accountants and advisers need to make people aware of it. I think sometimes because directors are not in a position to pay, they think if we don't lodge then they won't be aware of the debt but at the end of the day that's going to be a problem once the three-month period goes over so it's really about getting their clients informed once they are getting into a little bit of difficulty that they will just need to lodge,” he added.
“Just lodge it and then you'll get notice and then you have the opportunity to do something.”