Director Penalty Notices: What Every Company Director Needs to Know

Being a company director comes with a lot of responsibility and one of the biggest risks many business owners aren’t aware of is the Director Penalty Notice (DPN).

If your company has unpaid tax obligations, the ATO can issue a DPN to make you personally liable for certain debts, even if the company stops trading.

This isn’t meant to scare you,  it’s about making sure you know the rules so you can protect yourself and your business. Let’s break it down simply.

What Is a Director Penalty Notice?

A DPN is a formal notice from the Australian Taxation Office (ATO) that can make company directors personally responsible for unpaid:

• PAYG withholding
• Superannuation Guarantee Charge (SGC)
• Goods and Services Tax (GST)

It doesn’t matter if your company goes into liquidation or stops operating — if a DPN applies, the ATO can pursue you directly for these amounts.

Read more about DPNs on the ATO website →

Why the ATO Issues DPNs

If your company falls behind on lodging or paying BAS, PAYG, GST, or superannuation, the ATO can issue a DPN to recover the debt.

The aim isn’t to punish directors,  it’s to make sure businesses stay compliant and meet their obligations. But if you ignore it, the consequences can be serious.

Two Types of Director Penalty Notices  

1. Non-Lockdown DPN (21-Day Notice)

If you’ve lodged your BAS and super statements on time but haven’t paid the amounts due, you may receive a non-lockdown DPN.

You’ll have 21 days from the date of the notice to act. Your options include:

• Paying the debt in full
• Negotiating a payment plan with the ATO
• Placing the company into administration or liquidation
  Appointing a small business restructuring practitioner

If you don’t act within 21 days, personal liability kicks in.

2. Lockdown DPN

This is the more serious type. If your company fails to lodge BAS or super statements on time, the ATO can issue a lockdown DPN.

With a lockdown DPN:

• Personal liability is automatic
• You cannot avoid liability by placing the company into administration or liquidation
• The only solution is to pay the debt in full

This is why lodging on time, even if you can’t pay right away, is so critical.

Why This Matters Now More Than Ever

The ATO has ramped up debt recovery efforts in the past few years, especially for long-standing debts, including those that built up during or before COVID.

Many directors are now receiving DPNs for amounts they didn’t even realise were still owing, sometimes from years ago.

What to Do If You Receive a DPN

If a DPN lands in your inbox or mailbox, don’t ignore it. The clock starts ticking immediately.

Here’s what to do:

• Speak with your bookkeeper or accountant straight away
• Get advice from a tax or insolvency professional if needed
• Make sure all future BAS and superannuation lodgments are up to date even if you can’t pay the full amount

How to Protect Yourself as a Director

The best way to avoid DPN stress is to stay ahead of your obligations:

• Lodge BAS and super returns on time  even if cash flow is tight
• Regularly check your ATO accounts and correspondence
• Make sure your postal and email addresses are always current
• Keep clear financial records and engage early if payment issues arise

Need Help Staying on Top of It All?

Managing company obligations can feel overwhelming, especially if you’re juggling everything else that comes with running a business. You’re not alone and you don’t have to figure it out on your own.

We can help you:

• Set up cashflow and money management systems to ensure you have the funds available when deadlines roll around
• Stay compliant and avoid unnecessary penalties
• Set up better processes for tracking PAYG, GST, and super
• Understand your obligations as a director

If you want clarity and peace of mind, get in touch and let’s talk about how we can support you.

Content adapted from Australian Bookkeepers Network.