Director Penalty Notices and becoming a new director

New directors beware. An often unknown fact about being appointed as a new director is the almost immediate personal liability for some tax debts that arises upon such an appointment.

Before a person becomes a company director, check if the company has any unpaid or unreported PAYG-w, GST and SGC liabilities. Once a person is appointed as a company director they become personally liable for any unpaid amounts under the Director Penalty regime.

A new director can avoid becoming liable for director penalties that were due before their appointment, if within 30 days of their appointment, the company does one of the following:

• pays their debts in full for PAYG-w, net GST from 1 April 2020 (including luxury car tax (LCT) and wine equalisation tax (WET) amounts) and SGC from 1 April 2012
• appoints an administrator under section 436A, 436B or 436C of the Corporations Act 2001
• appoints a small business restructuring practitioner under section 453B of that Act
• begins to be wound up (within the meaning of the Corporations Act 2001)

Even if a person resigns as a company director within the 30 day period, they are still be liable for the company’s unpaid PAYG-w, net GST or SGC liabilities that were due before their appointment.

For further details about DPNs generally, see our DPN e-book by following this link. Also this link from the ATO website provides additional information (being current as at 6 May 2022).