Many practitioners would have noticed the terminology ‘Lockdown’ appearing more frequently in relation to Director Penalty Notices (DPN).

The term ‘lockdown’ is used to distinguish a DPN that arises as a result of a company failing to lodge its IAS/BAS returns within 3 months of its due lodgment date and failing to remit the debt due. This can be contrasted with a non-lockdown DPN that refers to a case where the IAS/BAS returns have been lodged within the deemed lodgment period but the funds have not been remitted.

Where the returns have been lodged within 3 months of the due lodgment date but the funds not remitted, the directors can still avoid personal liability by having the company placed into liquidation or voluntary administration within 21 days of receiving a DPN.

Where the returns have not been lodged within 3 months of the due lodgment date and the funds not remitted, the directors are unable to avoid personal liability by placing the company into liquidation or voluntary administration. That is their personal liability is ‘locked down’ and can only be avoided by payment of the debt or relying on one of the defense provisions.

These Lockdown DPNs are now being issued by the ATO even though the relevant company has been placed into liquidation.

The obvious point is that even if debts cannot be paid returns should still be lodged within 3 months of the due lodgment date.