The timing of when the PAYG withholding or net GST is notified to the ATO will determine what actions are available to remit director penalties.
If the unpaid amount of PAYG withholding or net GST is reported within three months of the due date (or, in the case of new directors, within three months of the date of their appointment), the penalty can be remitted by one of the following:
- paying the debt
- appointing an administrator under sections 436A, 436B or 436C of the Corporations Act 2001
- appointing a small business restructuring practitioner under section 453B of that Act
- the company begins to be wound up (within the meaning of the Corporations Act 2001).
If the unpaid amount of PAYG withholding or net GST is reported more than three months after the due date (or, in the case of new directors, three months or more after the date of their appointment), the only way to remit the penalty is to pay the debt.
For any portion of the underlying liability that is reported outside of three months or remains unreported, the director’s penalty for that portion can only be remitted by payment.
Remission can be achieved any time prior to a DPN being given; however once it is given, a director only has 21 days from the date of that notice to remit any director penalties stated on that particular DPN.
If the company enters into and maintains a satisfactory arrangement to pay the entire company debt, the ATO will not seek to recover the penalty from a director personally; however, the ATO may offset a director’s personal tax credits. If the entire company debt is no longer under a payment arrangement, the ATO may commence or recommence action to recover the director’s penalty.