At HLB Mann Judd Insolvency WA, we always warn and remind directors and their advisors to be wary of personal liability that is associated with PAYG-w and superannuation guarantee charge (“SGC”) arrears in connection with the Director Penalty Notice (“DPN”) regime.

In most cases, directors and their advisors are aware of the difference between non-lockdown and lockdown DPNs, that being:

1. Non-lockdown DPNs are issued when a company has complied with its reporting obligations for PAYG-w and SGC on time (or at worst, no later than three months after the lodgement due date), but payment has not been made.

a. Non-lock down DPNs contain ‘options’ for the director to avoid personal liability for the debts by either causing the company to pay the debt, or by placing the company into liquidation of voluntary administration within 21 days of the date of the DPN.

2. Lockdown DPNs are issued when the lodgements for PAYG-w and SGC are more than three months late and payment has not been made.

b. Lockdown DPNs do not contain the same ‘options’ and in short, the director is unavoidably personally liable – unless the debt is paid by the debtor company.

An important change to the SGC reporting aspect of the DPN regime came into effect on 1 April 2019 and right now, we are in the first critical period where directors may find themselves being caught by lockdown DPNs.

The three month lodgement ‘grace period’ for SGC is no longer available.

In brief, for a director to circumvent the unavoidable personal liability for SGC (i.e. a lockdown DPN), the lodgement of SGC statements for the June quarter 2019 must be completed by the company on time. That is, for the June quarter just gone, on or before Wednesday, 28 August 2019.

If a company misses that deadline, the director will be in the sights of the ATO for an inevitable lockdown DPN.

So any accountants or bookkeepers out there who have clients and directors struggling to pay their super on time, be very mindful of this subtle change to the law.

Please note that the three months grace period continues to apply to PAYG-w reporting, for the time being at least.

This change is yet another sign that the ATO is becoming tougher on matters of non-compliance. The next raft of changes will possibly include GST as a result of the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019. We will keep you posted on this as more information comes to light.

In closing, I also wanted to share a practical example of how DPNs and a company’s deregistration can play out.

A director of a company decided in early 2018 to conduct an informal ‘wind down’ whereby he made an offer to all of the company’s creditors to accept less than 100 cents in the dollar. The offer was accepted in 95% of cases and the funds were disbursed. The company was essentially assetless and dormant after those events; however a residual tax debt was left behind, a proportion of which was PAYG-w.

Because all of the company’s BAS lodgements had been completed on time, the guidance to the director was to keep an eye out for a DPN, because the ATO could issue on at any time.

Sure enough, about 18 months later, he received a DPN for about $30K of unpaid PAYG-w. In order to avoid the personal liability, he would need to place the company into voluntary administration or liquidation before the 21 day DPN notice period had elapsed, but because the company had no assets and therefore no means of remunerating a Liquidator, that meant he would also need to indemnify an insolvency practitioner to take on the appointment.

In the background whilst the DPN issue was playing out, ASIC had also commenced steps to strike the company off their register (i.e. deregister the company).

By the time the director had come up with the funds to indemnify and was ready to make the appointment of a liquidator, the company had been deregistered, just some four days earlier. And you cannot wind up a deregistered company.

Now theoretically a company can be reinstated under certain circumstances; however time was not on the director’s side, and nor did he have the resources to seek a reinstatement of the company.

The wash up was, he became personally liable for the full amount of the unpaid PAYG-w.

A trap for young players. Dormant companies can be deregistered – and DPNs can still be issued after deregistration, making it very difficult for directors to avoid the associated personal liability.

So the message here is, if a client elects to adopt the ‘let’s wait and see what the ATO does’ approach in relation to DPNs, in addition to keeping an eye on the letterbox for said DPNs, also watch out for an ASIC initiated strike off. As this example demonstrates, the two do not mix well together.

If you have any queries about this change to the DPN regime, or how it may play out in light of your client’s circumstances, please feel free to contact us at HLB Mann Judd Insolvency WA.

About the author

Greg Quin is a Director at HLB Mann Judd Insolvency WA and has been with the team for 10 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.

If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to


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