Funding to pay out a Director Penalty Notice

A Director Penalty Notice makes a company director personally liable for unpaid PAYG withholding, GST or superannuation guarantee charge. HomeSec funds the payment against property equity, from $20,000 to $5,000,000, remitted directly to the Australian Taxation Office and generally settled within 24 hours — the only remission route that leaves the company trading and the director out of administration.

The 21 days started before you opened the envelope

This is the detail that costs directors the most time. The 21-day period runs from the date the Commissioner posts the notice, or leaves it, at the address recorded for you on the ASIC register — not from the date you receive it, and not from the date you read it. Notice is taken to have been given when it is sent. The Commissioner may also use an address held in ATO records, and for a former director, the last address known.

If the ASIC register still shows an old address, or the notice sits at a registered office you visit weekly, you can lose a third of the window before you know it exists. Check the date on the notice itself, not the postmark, and count from there.

Four ways to remit the penalty. Only one keeps the company.

Where the underlying amounts were reported to the ATO within the required time, the notice is a non-lockdown DPN, and the penalty can be remitted if, within 21 days, you do one of the following:

• Pay the company's liability in full. Not the director's share of it, and not part of it — the whole amount in the notice.
• Appoint a voluntary administrator.
• Appoint a small business restructuring practitioner.
• Begin winding the company up.

Three of those four end the business as it currently operates. The fourth is a payment. That is the entire reason funding exists for this — not because a loan is clever, but because the alternatives on the list are insolvency processes and the payment is not.

Each of the insolvency options has to be effected inside the 21 days, not merely resolved upon or instructed. Booking a meeting with a liquidator on day 20 is not an appointment.

If the notice is a lockdown DPN

Where the amounts were not reported within the required period, the notice is a lockdown DPN. Administration, restructuring and liquidation no longer remit the penalty. The debt follows the director personally whatever happens to the company, and payment is the only remaining option.

A lockdown notice is the strongest case for funding we see. There is nothing to weigh up. Either the money is found or the liability becomes personal, and it does not go away when the company does.

Newly appointed directors

Being new does not protect you. A director appointed after the obligation fell due generally becomes liable for the pre-existing amounts if they remain unpaid 30 days after the appointment. If you have recently joined a board or been added as a director of a family company, the outstanding PAYG withholding, GST and super position is the first thing to look at.

How we fund it

We lend against equity in real property — the director's home, an investment property, or commercial premises — and remit the funds directly to the ATO using the payment reference number on the notice. We do not require tax returns, current lodgements, or a clean credit file, which matters here because the businesses receiving these notices are rarely up to date on any of the three.

Where the notice is inside the last week of its window, tell us on the first call. A caveat can be lodged and settled without a first mortgagee's consent, which is usually what makes the difference between funding inside the period and funding after it.

How much you can borrow

Take the property's value, multiply by 80% for residential security or 70% for commercial, and subtract what is already owing on it. What is left is roughly what is available, between $20,000 and $5,000,000. Several properties can be added together, and the borrower does not have to be the owner — companies, trusts and sole traders — including start-ups, with everyone on title signing. Up to 80% on residential and 70% on commercial. Lower on large acreage, and LVRs may reduce on properties worth less than $800,000.

From the call to the money

What it costs

Priced per file, on the property, the position, the amount and the exit. No rate is published, because a rate with "from" in front of it is the best file's number. How it is priced, and every fee that exists.

Reviewed by Catriona Anderson, General Manager