Case Study 2
The Surprise of a DPN After Liquidation
For many directors, the decision to liquidate a company marks the end of financial worries tied to business debts. But what if, after taking steps to close that door, you find out it’s still open? This was the reality for our client, who received a Director Penalty Notice (DPN) from the ATO for unpaid superannuation—even though their company had already gone into liquidation. Here’s how we helped them face and overcome this unexpected twist.
The Critical Difference: Lockdown vs Non-Lockdown DPNs
When it comes to DPNs, not all notices are created equal. In our client’s case, the ATO treated the superannuation debt as a “lockdown” liability, which left them personally liable despite liquidation. This difference in DPN types can change everything, determining whether a director can protect themselves through liquidation or if they remain accountable for unpaid debts. Navigating this distinction was the key to protecting our client’s assets and rights.
Peeling Back the Layers
Exposing the ATO’s ‘Cookie-Cutter’ Approach
As we examined the DPN notice, we found a critical flaw: the ATO had issued a generic, mass-produced claim that failed to consider our client’s unique circumstances. The standard template overlooked what had actually transpired in relation to superannuation. This discovery was our opportunity. But the problem remained as to how the debt could be reduced or resolved.
Turning the Tables: A Win for Our Client
The ATO does not necessarily want to over-tax or over-collect from people. Therefore, the goal was to find someone who could help us. There is no legislative mechanism for a director to resolve this situation. The way it works is the company is supposed to challenge the superannuation liability, and this flows automatically to the DPN. If the Company has been liquidated, it is no longer around to do this. This is the conundrum.
We were fortunate in that our client had kept all the necessary records and then we had the additional fortune of being able to connect with someone at the ATO who was willing to hear us out and then assist. In this case we were able to make it very obvious that the DPN amount was wrong, and this was then validated by the ATO.
Key Takeaways
- Understand DPN Types: Know whether your DPN is lockdown or non-lockdown. This distinction is critical as it determines whether liquidation or repayment within 21 days can protect you from liability.
- Act Quickly and Strategically: With a DPN, timing is everything. If you receive a non-lockdown DPN, consider your position. It might be better not to wait for a DPN and have the pressure of the 21 day limit.
- Seek Professional Support: Dealing with a lockdown DPN, particularly for superannuation, is complex. Having experienced legal assistance can help you build a robust defence to challenge unfair claims.
- Retain Documentation: Retaining thorough records can strengthen your case and potentially influence a favourable decision.
Received a Director Penalty Notice?
If you’ve received a Director Penalty Notice and are unsure of your options, our team at Adam Ahmed & Co can help. With extensive experience in defending directors and navigating complex DPN claims, we’re here to support you in protecting your financial future.