ATO Cracking Down on Director Penalty Notices for Late Payment of Employer Obligations

Whilst the ATO took a lenient approach to overdue employer obligation payments in the midst of COVID-19, it’s important to us that businesses, and in particular company directors, are prepared for the ATOs increase in the issuance of DPNs following Australia’s gradual recovery from the pandemic’s business-related side effects. 

Firstly, what is a DPN?

A DPN, otherwise known as a director’s penalty notice, is a notice that is sent to the director or former director of a company, that holds this person(s) personally responsible for outstanding employer obligations. Such obligations include super guarantee contributions (SGC), PAYGW, and GST.

We have noted across our clients, and the industry that the ATO is taking a much tougher line and has greatly increased the number of DPN's it is issuing. 

When is a director issued a DPN? 

A director holds a responsibility to ensure that the company acts in accordance with its employer obligations from the first day that these are accrued. If a company fails to comply with such obligations by the due date for payment, the ATO is entitled to claim these respective amounts personally from a current or former director. 

Super Guarantee obligations

We have particularly noticed an increase in DPN's regarding late super guarantee contributions. The ATO receives information from superannuation funds to indicate when SG contributions for employees have been processed. This information combined with single touch payroll reporting, is utilised by the ATO to flag employers that have failed to uphold SG obligations by either making payments of an incorrect amount, or late payments.

Superannuation contributions must be paid no later than 28 days after the end of the quarter. The payment due dates are as follows: 

Penalties for late payments of super

Failure to pay an SG contribution on-time requires an employer to lodge and pay a super guarantee charge statement with the ATO within one month after the payment was due, which comprises of:

1. Unpaid or late SG amounts
2. Interest on unpaid or late SG amounts
3. And an admin fee of $20 per employer per quarter

Where an employer fails to lodge and pay a super guarantee charge statement within one month after the payment was due, the employer will be subject to:

1. A super guarantee charge equal to the superannuation contributions payable
2. Nominal interest
3. An administration fee
4. An additional fee equal to double the amount of the superannuation guarantee charge

It is also important to note that late SG payments are not deductible, and SG contributions are considered "paid" on the date that they are received by the superfund. Therefore, employers should allow time for payment processing delays.

Additional employer obligations 

Whilst this article dissects the process associated with late SGC payments, it is important to us that businesses understand that DPN's can also be issued in relation to late or inaccurate PAYGW and GST payments. Visit the ATO to find out more.

Get in Touch

Given the significance of these penalties, and the personal liability that director’s bear if employer obligations are not upheld, it is imperative to ensure that respective payments are accurate and paid prior to the due date to account for any unforeseen processing delays. Our team at Azure Group are happy to address any enquiries that you may have, get in touch!

Have you noticed our #FridayExpertTips... here's one that relates to #Superannuation

“Superannuation: Make sure any contributions you make are within the contribution caps, so you don’t pay a penalty tax."