If you have received a Director Penalty Notice (DPN) for unpaid taxes and you/your company were unable to pay the tax debts for circumstances beyond your control, you may be able to successfully defend the DPN.

You will not be liable for director penalties if you can establish one of three defences:

• illness (or justifiable non-participation in management),
• all reasonable steps,
• in the case of SGC and GST Act liabilities, that the company took a ‘reasonably arguable position’ in applying the relevant legislation.

Illness:

You did not take part, and it would have been unreasonable to expect the director would take part, in the management of the company during the relevant period the liabilities accrued due to illness or another acceptable reason; or

All reasonable steps:

You took all reasonable steps to ensure the Company:

• paid its debts in full;
• appointed an administrator;
• appointed a small business restructuring practitioner; or
• began to be wound up.

Reasonably arguable position: 

This defence is available for SGC liabilities and net assessed amounts of GST when a DPN results from the company treating the Superannuation Guarantee (Administration) Act 1992 or A New Tax System (Goods and Services Tax) Act 1999 as applying in a particular way that was reasonably arguable.

The general test is whether, having regard to the relevant authorities, what is argued for is about as likely to be correct as incorrect.

If you think you might have a valid defence, contact us now so that we can assess your circumstances and give you guidance as to whether you have a valid defence