Under the old regime, if a director has received a Director Penalty Notice (“DPN”), he could avoid personal liability for the company’s tax debt by entering into an instalment payment arrangement with the ATO.

Under the new regime, entering into an instalment agreement will not remove the director’s obligations under the DPN. The only thing an instalment agreement will do is to preclude the Commissioner from commencing proceedings to enforce the obligation of the director’s penalty notice for the period while payments are made.

The new regime confirms that a DPN takes effect from the date when it is posted — NOT when it is received by the director (DCT v Meredith).

The notice period of the DPN under the new regime has been extended from 14 days to 21 days before recovery proceedings can be taken against the directors.

To avoid personal liability, the company must appoint a Liquidator or Voluntary Administrator within 21 days from the date of the notice.

The defence of “illness or other good reason” is made more difficult for a director to rely on. In addition to establishing the director was ill or for some other good reason did not participate in the management of the company at the time the relevant tax liability fell due, the director must now also establish that it would have been unreasonable to expect her or him to have taken part in the management of the company at that time. This fixes drafting problems with the existing provisions.

The Court has no power under section 1318 of the Corporations Act to grant relief to a director from their obligations in respect of a DPN. This confirms the existing law in DCT v Dick.

The ATO has no discretion to remit a DPN regardless of circumstance.