Director Penalty Notice

A director penalty notice makes a company tax debt your personal debt. The 21 days you have to respond run from the date the ATO posted the notice, not the day you opened it — and which options are still available to you depends on whether your company lodged its statements on time.

What is a director penalty notice?

A director penalty notice (DPN) is a notice from the Australian Taxation Office that makes you personally liable for certain unpaid company tax debts. In the ATO’s own words, “if your company doesn’t pay certain liabilities by the due date, we can recover these amounts from you personally as a current or former company director” under the director penalty regime.

The word personally is the whole point. The debt stops being something the company owes and becomes something you owe, recoverable from your own bank account, your wages, and your personal assets. Former directors are not automatically out of reach either.

Do I still have options, or has my window closed?

You almost certainly still have options, but which ones depends entirely on whether the company reported the liability on time. If it did, the penalty can still be remitted by paying, by appointing an administrator, by appointing a small business restructuring practitioner, or by beginning to wind the company up — all within the 21 days. If it didn’t, paying the company liability in full is the only route left.

That single fork decides everything else on this page. Before you read further, find the date on the notice and check whether your BAS, IAS and SGC statements were lodged on time. If you are not sure, that is a normal place to start — most directors aren’t sure, and it is the first thing we check.

Which debts can a DPN make me personally liable for?

A DPN covers three liabilities and no others: pay as you go (PAYG) withholding, goods and services tax (GST), and the super guarantee charge (SGC). Company income tax, supplier debts and commercial loans are not recoverable through a director penalty notice.

Unpaid superannuation catches directors off guard more than the other two. It sits inside the same regime as PAYG and GST, and the rules for clearing it are slightly stricter — for SGC, the reporting test is whether the statement was lodged by its due date rather than within a three-month window.

How do director penalties actually work?

A director penalty is what the ATO calls a “parallel liability” — your personal liability mirrors the company’s liability, so a payment made against either one reduces both by the same amount.

If a company has more than one director, each director can be pursued for the full amount, and the ATO may pursue whichever director it considers best placed to pay, rather than splitting the debt evenly. Where a company hasn’t reported its PAYG, GST or SGC obligations by the due date, the ATO can also issue an estimate of what is owed — and a director penalty can apply to that estimated amount before the actual figure is confirmed.

When does the 21 days actually start?

The 21 days start on the day the ATO posts the notice or leaves it at the address registered with ASIC — not the day you open it. The ATO states this plainly: “the 21 days starts on the day we post the DPN or leave the DPN at the address registered with ASIC.”

This is the detail that quietly costs directors their options. If your ASIC-registered address is an old accountant’s office, a previous business premises, or a home you have moved out of, days are being consumed before the envelope reaches you. Check the date printed on the notice, not the postmark on the envelope and not the day it landed on your desk.

Why are director penalty notices increasing?

DPN numbers have climbed sharply as the ATO winds back the leniency shown during the pandemic. In the 2024–25 financial year, the ATO issued more than 84,000 DPNs to directors of roughly 64,000 companies — a 136% jump on the year before.

That is a steep climb from just a few years earlier, when the ATO issued around 18,500 DPNs across the whole of 2022. In practical terms: directors who might once have had more time to sort things out informally now have a much shorter runway.

What is the difference between a lockdown and a non-lockdown DPN?

Note what the table shows about lockdown notices. Appointing an administrator or liquidator does not help — the personal liability survives the company. That is why the lodgement question matters more than almost anything else in this process.

If my DPN is non-lockdown, what can I do inside the 21 days?

You have four routes, and three of them involve a formal appointment that has to be made before the 21 days expire. The company can pay the outstanding amount in full, appoint a voluntary administrator, appoint a small business restructuring practitioner, or begin to be wound up.

Each of those is a serious decision with consequences well beyond the notice, and none of them should be made on day nineteen. Getting an appointment in place takes preparation, and a practitioner or administrator needs time to look at the company before accepting the role.

What we see, and why it matters here

The mistake we see most often isn’t misreading the notice. It’s timing: directors wait until the business is already out of cash before considering restructuring at all. Restructuring is designed to give a viable business breathing room — it isn’t built to rescue one that has already run out of oxygen.

By the time a DPN arrives, that pattern has usually been running for months. The notice is rarely the first sign of trouble; it’s the point at which the trouble stops being the company’s problem and becomes yours. Directors who ring us early in the 21 days have a genuine choice between the options above. Directors who ring us late are often choosing between one option and none.

If my DPN is a lockdown DPN, is there anything I can do?

Paying the company liability in full is the only way to remit a lockdown director penalty. There is no appointment, arrangement or negotiation that removes it.

That does not mean nothing can be done — it means the question changes. Instead of “how do I remit this penalty”, it becomes “how do I fund this liability, and what does that mean for the company and for me personally”. Refinancing, restructuring the wider business tax debt position, and understanding your personal exposure are all still on the table.

Can I get a payment plan for a director penalty notice?

A payment arrangement does not remit a director penalty on its own — only paying the liability in full, or one of the non-lockdown appointment options inside 21 days, does that. Arrangements are a way of funding the liability, not a way of removing it.

Directors regularly assume a payment plan pauses the 21-day clock. It does not. If a plan is part of your answer, it needs to sit alongside a decision about the notice itself, not instead of one.

What defences are available to a director?

The ATO sets out three defences, and each has to hold for the entire relevant period. You did not take part in the management of the company because of illness or another acceptable reason; you took all reasonable steps to ensure the company paid, appointed an administrator or restructuring practitioner, or began to be wound up (unless no reasonable steps were available); or, for SGC and GST only, the company applied the law in a way that could reasonably be argued was correct and took reasonable care.

These are narrow. Courts have consistently found that relying on other directors or your accountant isn’t a valid defence, and “I did not know the company was behind” is not, on its own, any of the three. If you think a defence may apply to you, it is a question for a lawyer, and worth raising early rather than at the end of the 21 days.

I was appointed recently — am I liable for debts from before that?

New directors get a 30-day window. The ATO states that as a new director “you will not be liable for a director penalty that was due before your appointment if, within 30 days of your appointment, you ensure the company” pays the amount outstanding or takes one of the other resolution steps.

Miss that 30 days and liabilities that pre-date your appointment can attach to you. If you have recently joined a board, or agreed to become a director of a family or friend’s company, this is worth checking before it becomes urgent.

What happens if I ignore a director penalty notice?

The ATO can begin recovering the penalty from you personally 21 days after the notice is issued. That includes offsetting your personal tax refunds and credits against the director penalties, issuing a garnishee notice, and taking legal action.

A garnishee notice “requires a third party or someone who owes you money, to pay the required amount to us, instead of to you”. The ATO can issue one to your bank, your employer, businesses that owe you money, merchant card providers who process your customer payments, and solicitors or agents handling a property sale. The recipient is legally required to comply, and the notice can continue until the full amount is paid.

Can a director be personally liable for company debts more broadly?

Yes — a director penalty notice is one route to personal liability, not the only one. Personal guarantees on leases and supplier accounts, and insolvent trading provisions under the Corporations Act, can each create personal exposure independently of any ATO notice.

Resigning does not close the door either. If you resigned as a director, you can still be liable for a penalty relating to company debts that were due before you resigned, or that became due afterwards but relate to a reporting period when you were still a director.

This is worth mapping out early, because directors often deal with the DPN in isolation and are then surprised by what else follows. A full picture of your exposure is part of what we look at in the initial consultation. For the broader position, see our business tax debt overview, or how restructuring compares with the alternatives in small business restructuring vs liquidation vs DOCA.

What does Debt Negotiators do — and what do we not do?

We help directors understand their position and which options may be open to them, based on their financial circumstances. We are an AFSA-registered Debt Agreement Administrator, we hold Australian Credit Licence 390820, and we are a member of the Australian Financial Complaints Authority (25029).

We are not the registered liquidator who acts as a restructuring practitioner or voluntary administrator — only a person registered with ASIC as a registered liquidator can take that role. Where a formal appointment is the right path, we help you understand whether it may be worth exploring and work with you on the wider debt position, including any personal exposure that follows you out of the company.