Director Penalty Notice in Australia
A Director Penalty Notice is an official letter the Australian Taxation Office sends when your company hasn’t paid certain tax debts. As a director, you can become personally responsible for these unpaid taxes. This includes PAYG withholding, superannuation guarantee, and GST obligations.
According to Accountants Daily, in the 2023–24 financial year, the Australian Taxation Office (ATO) issued 26,702 Director Penalty Notices (DPNs) to company directors. These notices covered a total corporate debt of around $4.4 billion! 2025 is no exception, so the team at Macmillan Lawyers and Advisors has compiled this guide explaining everything you need to know about Director Penalty Notices.
Key Takeaways
- There are two types of DPNs: a 21-Day DPN that gives you time to act, and a Lockdown DPN that makes you instantly liable with no escape.
- DPNs can be triggered by unpaid PAYG tax, employee superannuation, or GST that your company owes to the ATO.
- When you get a 21-Day DPN, you must pay the debt, start liquidation, begin voluntary administration, or enter Small Business Restructuring within 21 days to avoid personal liability.
- Macmillan Lawyers and Advisors can help you deal with DPNs by contacting the ATO, advising you on your options, and helping negotiate payment arrangements to manage your tax debt.
Your Guide to a Director Penalty Notice in Australia
A Director Penalty Notice contains your personal details, company information, the issue date, tax type (PAYG, super, or GST), and the amount owed. It specifies whether it’s a 21-Day or Lockdown DPN, with the former including your options: pay the debt, start liquidation, begin voluntary administration, or enter Small Business Restructuring. The 21-day countdown starts from the issue date.
| Details | Notes | Additional Notes |
|---|---|---|
| Date of Issue | The 21-day period runs from this date | It does not start from the date you receive the notice |
| Director’s Personal Details | The DPN is addressed to you specifically | Holds you personally liable |
| Company Information | Lists the company you are a director of | Includes company name and ABN |
| Type of DPN | 21-Day DPN or Lockdown DPN | Both types can apply for different tax amounts |
| Tax Liabilities Covered | PAYG, superannuation, GST | Based on unpaid and unreported tax obligations |
| Amount Owed | The amount you may be personally liable for | ATO may estimate if lodgements were not made |
| Deadline for Action | Timeframe to act on a 21-Day DPN | Usually 21 days from the issue date |
| Available Options | Ways to avoid personal liability on a 21-Day DPN | Pay debt, enter liquidation, voluntary administration, or restructuring |
| Delivery Address | Sent to ASIC-registered residential address or tax agent | Ensure ASIC records are up-to-date to avoid missed notices |
What Types of DPNs Exist?
There are two main types of Director Penalty Notices that exist in Australia: Lockdown DPNs and Standard (21-Day) DPNs. You can receive either one or both at the same time for different amounts. The type of DPN you get depends on when your company lodged its tax returns.
What is a Lockdown DPN?
A Lockdown DPN makes you immediately and personally liable for your company’s tax debts, with no way to escape. You get this when your company hasn’t lodged tax returns within 3 months of their due date. Even if you put your company into liquidation or administration, you’ll still be personally responsible for the debt.
What is a Non-Lockdown DPN?
A Non-Lockdown DPN (or 21-Day DPN) gives you 21 days to act before you become personally liable. Your options include paying the debt, starting liquidation, beginning voluntary administration, or entering Small Business Restructuring. The 21-day countdown starts from the notice date, not when you receive it.
What Sorts of Debt can trigger a Director Penalty Notice?
The ATO can issue DPNs for three types of unpaid company taxes which trigger this notice: PAYG withholding (tax from employee wages), Superannuation Guarantee Charge (super owed to employees), and GST. For super debts, you’re liable for the original amount plus interest and processing fees.
What can you do when you receive a DPN?
Your options depend on the DPN type. With a 21-Day DPN, you must pay the debt, start liquidation, begin voluntary administration, or enter Small Business Restructuring within 21 days. With a Lockdown DPN, you’re already personally liable, but should seek professional advice immediately to discuss payment options.
Parallel Liability Explained
Parallel liability means all directors of your company are equally responsible for the same tax debt. The ATO can pursue the company or any director for the full amount. If you pay, it reduces both the company’s debt and other directors’ penalties. If only you pay, you can recover funds from the company or other directors.
Who can you contact if you’ve received a Director Penalty Notice?
Feel free to contact Macmillan Lawyers and Attorneys. We can advise you on how to handle a Director Penalty Notice the legal way. We’ll also assist you with any possible reductions in your debt that you may have access to. Whether you’re a company owner, or a team of executives, our legal team is experienced in dealing with ATO and DPNs of both types.
Can You Negotiate with ATO After Receiving a DPN?
You can negotiate with the ATO after receiving a Director Penalty Notice, but your options depend on the type of notice. For 21-Day DPNs, setting up a payment arrangement is one of your valid options to avoid personal liability within that 21-day window.
With a Lockdown DPN, negotiation is more difficult since you’re already personally liable. However, the ATO still has the option to work with you on a payment plan. Your ability to negotiate successfully often depends on your compliance history and how quickly you respond.
For the best outcome, allow our team to contact the ATO immediately after receiving any DPN. We can help you prepare a realistic payment proposal based on your financial situation. Remember that any payment arrangement must be formally accepted by the ATO before the 21-day deadline expires.
Director Penalty Notice FAQs
Can a former director receive a DPN?
Yes, you can receive a DPN even after resigning as a director. The ATO can still hold you personally liable for tax debts that existed during your time as director. This includes PAYG, superannuation, and GST obligations that became due while you were in the role.
What happens if I ignore a DPN?
If you ignore a DPN, you become personally liable for the company tax debt and the ATO can take direct action against your personal assets. This includes freezing your bank accounts, garnishing your wages, or eventually forcing you into bankruptcy if the debt remains unpaid.
Can I avoid a DPN by resigning as a director?
No, you can’t avoid a DPN simply by resigning as a director. You remain liable for all tax debts that were incurred during your directorship, even if you resign before the ATO issues the notice.
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