A Director Penalty Notice (DPN) is a notice that the ATO sends to directors, making them personally liable for certain tax debts, namely the Pay as You Go Liabilities and Superannuation Guarantee Charges.
In other words, if you were, or are, the director of a company, the ATO is pursuing you for money that they believe to be owed, and those at the ATO can be rather aggressive in doing so. Many people don’t respond to these letters, but this doesn’t make the situation go away. To ensure that you resolve the issue and don’t run into any troubles down the road, it’s important to take action.
There are several different DPN defences that you can pursue, and as a result, you can hopefully avoid personal liability for the money in question.
Writing a Defence Letter
To keep things official and to increase your chances of avoiding liability, you will want to draft a DPN defence letter and submit it to the ATO.
Defence letters are generally either assertive or conciliatory, and you will be able to find templates and other resources to help you make sure you do things correctly. By finding a director penalty notice defence letter example, you can feel more confident about creating your own. Example letters will help you understand formatting and tone so that you can craft a letter that best suits your situation.
Your Defence Options
Directors may not be personally liable if they can establish a convincing defence, and these come in many forms.
For example, you could argue that the director wasn’t involved in the management of the company during the period of time in question. Not only was the director not involved, but under the circumstances, it would have been unreasonable for him to be. Other potential defences include:
- Demonstrating the company applied the provisions of the Superannuation Guarantee (Administration) Act 1992.
- Explaining how the director took reasonable steps to pay the debt, appoint an administrator to the company, or commence winding up proceedings.
The avenues for a defence are rather limited, but if any of the scenarios fit your situation and can be convincingly proved, you may be able to avoid personal liability.
Other Ways to Avoid Liability
The recent changes in DPN laws were designed to change the behaviour of directors. In general, to avoid liability, you want to make sure your tax returns are up to date and lodged. Additionally, if you get a 21-day DPN, simply get advice and act within the timeframe, and you could avoid liability.
Getting Advice and Using Your Resources
In any situation, especially if you are unfamiliar, the best thing that you can do is to use your resources and get advice from the experts. If you are writing a defence letter, make sure you look at examples and find a template so that you do things right. If you do everything right and have a good defence, you may be able to avoid personal liability.