ATO Sending Lots of "Lockdown" DPNs
We’re noticing a trend of the ATO sending an increasing number of DPNs for old debt. More often than ever before we are receiving calls from directors who have closed their company with a liquidation, and received a lockdown DPN, often years later (the current record is a recently issued DPN relating to company liquidated in 2012!)
A Refresher on DPN Law
The ATO can pursue the directors of a company for unpaid PAYG, Superannuation Guarantee and GST debt in some circumstances. They do this by sending a Director Penalty Notice (DPN) to the director. Those notices come in two forms:
The traditional (Non-Lockdown) 21 Day DPN
Where a company has a PAYG, Super Guarantee Debt or GST Debt, then the ATO can issue a DPN giving the director 21 days’ notice of the impending personal liability. As long as the director causes the company to pay the debt, wind the company up or put it into restructuring in those 21 days, the director will avoid personal liability. This DPN applies where the company has been lodging its BASs on time but hasn’t paid the debt.
The more recent “Lockdown” DPN
In June 2012, further DPN laws were introduced. These laws apply where a company has not lodged its returns on time. The criterion used is whether the BAS return (for PAYG or GST) or Superannuation Guarantee Charge (SGC) statement (for super) was submitted within 3 months of its due reporting date. If the debts were not properly reported, the ATO can use a harsh version of the DPN that is commonly referred to as a “Lockdown DPN”. The Lockdown DPN informs the director that they are already liable for the amount on the DPN and even a liquidation will not help them to avoid liability. Lockdown DPNS can be issued even after the company has been though a liquidation.
More often these days the ATO issues a combined notice informing of a partially avoidable and partially locked down debt. These DPNs especially are difficult to decipher. Our experts are always happy to help and can decode them at a glance.
How to Avoid Lockdown DPNs
Prevention is the best cure for a Lockdown DPN. Make sure that, even if they can’t be paid, BAS Statements, and Superannuation Guarantee Charge Statements are lodged on time.
How to Respond to a Lockdown DPN
We usually get callers to send a copy of their DPN through for one of our experts to look at. Our experts can quickly interpret for which amounts personal liability might be avoidable.
It is helpful if you consider the notice for factual errors first. Do you agree with the facts as they are presented? If you think anything is incorrect that is useful fodder for a letter of defence. We’ve seen whole penalties set aside for something as simple as a typo in an address.
Depending on what our expert sees, they will recommend one of several solutions. Our solutions could include something simple like a letter of defence, or more drastic approaches like, company liquidation or Small Business Restructuring,