Are you a company director? Are you getting hassled by the ATO or other creditors for overdue payments? Have you been keeping all your tax obligations up to date? Have you received a statutory demand or a wind up notice?
Don’t be an Ostrich Director!
Ostrich Director (definition)
NOUN
[os-trich] [dih-rek-ter]
A director of a company who ignores company problems and disregards his or her obligations which in turn makes the situation worse.
Just because you are avoiding something does not mean it is not there, if you ignore your tax obligations it will not make the debt disappear nor will it stop the ATO from pursuing the debt.
All too often we come across “Ostrich Directors” who bury their head in the sand, avoiding the problem that is suffocating the life out of their business. It could be a tax debt, wind up application, cash flow crisis or any other problem that may arise. The one thing all of these issues have in common is that avoiding them does not make the situation better. Being pro-active, seeking advice if needed and implementing a strategy to rectify the problem is the best course of action.
What many of these “Ostrich Directors” don’t know is that ignoring the immediate problems of the company not only affects the business itself but could also have ramifications on the director personally. If a director ignores their tax obligations they may be served with a Director Penalty Notice (DPN).
Being served with a DPN is not a good thing by any stretch of imagination, but for “Ostrich Directors” it could be devastating.
The ATO uses the DPN process to recover company debts from directors and the only way to avoid personal liability, if you have been making your lodgements on time, is to do one of three things within 21 days of the date on the notice:
- Pay the debt
- Appoint a voluntary administrator
- Appoint a liquidator
For a director who has lodged all his lodgements within three months of their due date and is issued with a DPN, utilising any of the three options above within 21 days will excuse the director from personal liability. Whereas an “Ostrich Director” who has been avoiding the ATO and ignoring their tax obligations can still be held personally liable for the debts associated with lodgements that are 3 months or more overdue.
Our takeaway for directors is to make sure you make your lodgements on time!
All businesses run into problems from time to time, running a business is not always smooth sailing, but as a director of a company with the right advice you have the best chance of navigating the dilemmas your industry might throw your way.
If you would like to chat about how your business is performing please contact Carl Anderson.