Directors who have amassed large assets, such as trophy homes and flash boats, while not passing on collected taxes to the government, are some of the first in the firing line.
The Tax Office is ramping up action against company directors as it chases $2.5 billion in unpaid taxes from businesses that have failed to pay superannuation, pass on GST or pass on income tax of employees.
The huge jump in the numbers is mostly due to the lifting of a grace period the ATO put in place during the pandemic when it sharply reduced its enforcement activities. For example, for the 2021-22 financial year, the ATO only issued 4,362 director penalty notices . Directors who don’t do this and allow their business to trade and ignore the notice will receive a “lockdown DPN”. The ATO has a stated policy of not compromising on lockdown DPNs and there is no legislative basis to waive such debts.
At the coalface of business distress, Kathy Sozou, a partner at restructuring advisory group McGrathNicol and vice president of the peak body for insolvency practitioners, said the rate of DPNs being issued hit around 30 to 40 a day earlier this year.Sozou said company directors needed to speak to their accountants more frequently to get advice on the viability of their business.
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