Running a business facing insolvency can be overwhelming, often leading owners to avoid confronting mounting challenges. This pressure creates a cycle of hope and denial, with phrases like “if we can just…” echoing until all options seem exhausted, prompting a delayed search for advice.
Unfortunately, this cycle can last longer than necessary. Many business owners reveal they have received a Director Penalty Notice (DPN) from the ATO, often long after it was issued. Common reasons for receiving a DPN include:
- Not engaging with the ATO regarding outstanding debts.
- Lacking an active payment arrangement.
- Having tax debts over $100,000.
- Owing superannuation guarantee amounts.
DPNs come in two types: “lockdown DPNs,” which hold you personally liable for tax debts, and “non-lockdown DPNs,” which give you 21 days to act. With ASIC reporting a 36.2% year-on-year increase in corporate insolvencies, the risk of personal insolvency is rising, especially as the ATO intensifies its debt recovery efforts.
What to Do If You Receive a DPN
Ignoring a DPN is not an option. Here are steps you can take:
- Develop a Business Debt Strategy: Work with your advisor to create a strategy for addressing your business debt. This might involve negotiating with creditors, streamlining operations, selling non-core assets, or exploring funding options. If administration becomes necessary, your advisor may step in to manage the business. In cases of insolvency, you may need to appoint registered liquidators to wind up the business and negotiate with creditors.
- Address Personal Debt: Actions taken to stabilize your business can sometimes render a non-lockdown DPN ineffective if tax debts are settled and the business recovers. However, if you have received a lockdown DPN and proceed to liquidation, remember that the DPN remains in effect. The ATO cannot act during liquidation, but they will likely pursue the debt afterward.
Act Now
Receiving a lockdown DPN means that your business’s financial problems are now personal issues. While your advisor may not be able to address both simultaneously, they should take a holistic approach to ensure you have a clear understanding of your entire situation.
If your business is on the brink of insolvency, seek advice immediately. At Camden Professionals, even if we aren’t the best fit for your needs, we can recommend other resources that may be more suitable. This is especially crucial if you’ve received a non-lockdown DPN, as timely advice can help you avoid personal liability for business debts.
If you have a lockdown DPN or are dealing with a DPN related to a business that was wound up in the past, it’s time to confront the issue head-on. As the ATO intensifies its debt recovery efforts, delaying resolution will only diminish your ability to manage the debt on your terms. Don’t wait—take action now.
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How can we help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
How can we help?
If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
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