Impending Changes to the DPN and PPSR Update


Impending Changes to the Director Penalty Notices (continue from June 2019 Newsletter)

Readers will recall that our June 2019 Newsletter discussed the recent changes to the Director Penalty Notice (“DPN”) Regime in respect to superannuation.

Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 was re-introduced in the House of Representatives on 4 July 2019.

Once the bill is passed and receives Royal Assent, this new legislation aims at reducing / discouraging phoenix activity, gives more powers to the Commissioner of Taxation to make directors personally liability for unpaid GST and will allow the Commissioner to make estimates of the GST liability in the event an entity does not lodge a GST return.

The Commissioner is able to issue notices of estimated net amounts to tax payers who have failed to lodge a return.  After this notice of estimated net amounts has been issued, the tax payer is obliged to pay the estimated net amount, which is deemed to be payable on the GST lodgement due date.

The estimated amount may be overwritten by lodging an actual return (albeit this return will be lodged late and be overdue).
The estimated amounts will be a provable debt if they occur prior to bankruptcy/corporate insolvency, to protect the Commissioner’s position as a creditor of the company or bankrupt.

The Bill also allows the Commissioner to retain any tax refunds to offset other amounts owed to the Commissioner.

DPN Remission

The director has twenty-one (21) days from the date of the DPN to deal with the DPN.  

Options available to the director include placing the company into liquidation/administration or paying the amount that is due.  To avoid a lock down DPN, the director needs to make a formal appointment within three (3) months of when the amount was due to the Commissioner.

Defences for DPNs

The defences for DPNs that are already in place in respect to PAYG also apply to GST DPNs.  They are as follows:

  • Illness; and
  • The Company adopted a reasonably arguable position and has taken reasonable care.


When the changes become law there will be personal obligations that may be imposed on directors under the DPN regime with respect to unpaid GST.  It is imperative that advisers (working with their clients) be aware when a company is struggling to meet its statutory obligations and take essential steps to address these issues early.

If your clients are having difficulty in meeting their GST commitments, please contact Smith Hancock so we may discuss the options available.

PPSR Update

In our April 2019 newsletter we addressed the significance of the seventh anniversary of the Personal Property Securities Register (PPSR) and the impact this had on a number of registrations.

Additionally, there are a couple of other PPSR considerations that your clients should be aware of:

The Effect of Section 588FL of the Corporations Act

In our April 2019 newsletter we recommended that in the event that a registration on the PPSR automatically lapsed, a new registration be urgently completed to ensure protection of security interests. Your clients should also be made aware of the provisions of Section 588FL of the Corporations Act 2001 (the Act).

Pursuant to Section 588FL of the Act, a security agreement must be registered within 20 business days of its creation to be enforceable against an insolvency practitioner appointed in the following 6 months.

If registration automatically lapses, the re-registration would clearly be more than 20 business days from the date the security agreement came into force.

A secured party exposes itself to a risk that its security interest will vest in the grantor company in the event that the grantor company enters liquidation or voluntary administration in the subsequent six month period.

It appears that the only way to cure the late registration is to apply to the Court for an extension of time to register pursuant to Section 588FM of the Act.

Such application may be costly and is no certainty to be granted.

Therefore, your client should understand that completing a new registration where the prior registration automatically lapsed may not always protect your client’s security interests. The most effective method to ensure protection is to renew registrations prior to the registration end date.

The Final Transitional Period

The introduction of the PPSR created a combined register, superseding in excess of 35 other public registers. Registrations on these other registered were automatically migrated to the PPSR on 30 January 2012, often with missing or incomplete fields. The Personal Properties Securities Act 2009 provided a grace period finishing on 31 January 2017 to fix these migrated registrations that were migrated without an end date.

Accordingly, the transitional period provisions will no longer provide protection against defects in these migrated registrations meaning that some migrated registrations may no longer be effective. If your client has migrated registrations on the PPSR, we recommend that they seek their own advice to determine whether or not the registrations are defective.

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