If a Company does not pay its PAYG and superannuation guarantee charges by the due date it triggers an automatic penalty against the director in the amount of the tax owed by the Company, and the ATO will issue a Director’s Penalty Notice. To comply with the notice, a director must within 21 days of the date of the letter (not of the date of receipt) either:
cause the company to pay its Tax Obligations;
personally pay the Director’s Penalty; or
put the Company into liquidation or administration before the expiry of the Director’s Penalty Notice.
In this case, the Commissioner sent the director a Director’s Penalty Notice in March 2015 to an address given by the director on the ASIC register. Whilst the director still owned that property it was not his place of residence. He did not receive the letter until May 2015.
The director argued that he did not receive the penalty notice until May 2015 and claimed he missed the right to have the penalty remitted by placing the company in administration within 21 days of the notice.
The court held that the penalty notice was sent in compliance with the rules and was deemed to have been served on the director in March 2015.
This case is a timely reminder that directors should:
on receipt of a Director’s Penalty Notice take immediate action (including before taking any steps above seeking advice as to any available defences); and
ensure that their personal detailes are kept up to date on relevant registers.
This was a costly lesson for the director who could have avoided the personal liability.
Symoane Mercurio has experience in dealing with director’s duties, insolvency and turnaround. Please contact us if you want to discuss this type of matter or any other business related matter.