The ABC recently spoke to Andrew Christodoulou about his experience with receiving an unexpected Director Penalty Notice (DPN) from the Australian Taxation Office (ATO). Andrew received the letter informing him of a $437,000 debt related to unpaid Superannuation Guarantee Charge amounts, nearly a decade after the initial debt supposedly accrued. Andrew, who had never heard of a DPN, was stunned by the demand for such a significant amount, especially as it was more than his mortgage.
The ATO alleges that the company Andrew ran for 22 years, which went into voluntary administration in 2016, failed to pay superannuation to its employees during his tenure as a director. Despite stepping down as director due to health issues, Andrew is now personally liable for these unpaid superannuation contributions, with some debts dating back to April 2013.
This situation underscores the ATO's renewed focus on holding directors accountable for their companies' tax and superannuation obligations. The agency has been issuing more DPNs and garnishee notices, targeting current and former directors to recover outstanding debts. This approach is part of a broader effort by the federal government and the ATO to recoup over $34 billion in debt owed by small businesses and self-employed Australians, much of which was put on hold during the COVID-19 pandemic.
Tens of Thousands of DPNs Issued
The risk of directors being personally bankrupt if they don't pay workers' superannuation is one that the government has been warning of for some time now. Not only were laws passed by the Gillard Labor government in 2012 to make directors personally liable for super debts, but Assistant Treasurer Stephen Jones has reiterated his view that unpaid superannuation is akin to 'wage theft' and the government will be cracking down on it.
According to ATO data obtained by ABC News, between July 1, 2023, and February 29, 2024, 13,454 DPNs were issued, and 2,881 garnishee notices were issued. The DPN numbers are already tracking well above previous years, with 2022-2023 being the year when activity began ramping up.
| Financial Year | DPNs Issued | Garnishee Notices |
|---|---|---|
| 2018-2019 | 13,120 | 18,605 |
| 2021-2022 | 3,160 | 957 |
| 2022-2023 | 17,459 | 2,924 |
| July 1 2023 – Feb 29 2024 | 13,454 | 2,881 |
The ATO says "firmer debt collection actions" are needed because the agency "is committed to ensuring businesses that do not comply with their obligations aren't getting an unfair competitive advantage."
"The ATO prefers to work with taxpayers to resolve their situation through engagement rather than enforcement," an ATO spokeswoman told ABC News. "But it is also the ATO's responsibility to ensure a level playing field, protecting other creditors, and supporting those who are doing the right thing."
However, financial counsellors worry that this sudden ramp-up in activity is causing severe emotional and financial stress.
Andrew's experience highlights the potential consequences for directors, even years after a business has been wound up. It's a reminder of the importance of ensuring all tax and super obligations are fully met and documented, as well as the potential long-term impacts of business decisions and financial management.
For those facing similar situations, it's crucial to seek professional advice and address any issues with the ATO promptly to avoid further complications. The ATO's firmer stance on debt collection is causing significant stress for many, emphasizing the need for thorough financial and legal planning.
