Director’s Penalty Notice: Guide your business to financial recovery
Receiving a Director Penalty Notice (DPN) from the ATO can be overwhelming, but swift action is essential to protect your assets and minimise personal liability. A DPN holds directors accountable for unpaid PAYG, GST, and superannuation, making it critical to understand your options and act fast. Ignoring it can lead to serious financial consequences.
At AVA Advisory, we help Australian business owners navigate DPNs with expert advice and tailored solutions. Whether you need support with repayment plans, restructuring, or compliance, our team is here to guide you toward financial recovery.
What to do if you’ve received a Director Penalty Notice (DPN)
Receiving a Director Penalty Notice (DPN) from the Australian Taxation Office (ATO) can be a stressful experience, especially for small and medium-sized enterprise (SME) owners juggling financial obligations. DPNs signal that your company’s tax debts – such as PAYG withholding, GST, or superannuation – are overdue, potentially making you personally liable for those debts.
We will help you understand what DPNs are, why they’re issued, what your options are, and why seeking expert advice immediately is critical to protect yourself and your business.
How AVA Advisory can help
At AVA Advisory, we simplify the complex and stressful process of responding to a Director Penalty Notice (DPN). Our experienced team provides the guidance and expertise you need to protect your assets and achieve the best outcome.
Clear DPN assessment
We carefully review the notice to determine its type (21-day or Lockdown) and explain your obligations, timelines, and next steps. This ensures you fully understand your position and available options.
Customised debt solutions
Our tailored strategies include negotiating payment plans, restructuring debts, or guiding you through liquidation if necessary. We focus on providing practical and effective solution for your unique situation.
Administration guidance
If Voluntary Administration (VA) or liquidation is required, we help manage the process from start to finish, ensuring compliance and minimising risks to your personal assets.
Collaborative legal support
While we don’t provide legal services, we work closely with insolvency lawyers to explore defences, assess DPN validity, and address any legal complexities, giving you a comprehensive response plan.
Why is the ATO issuing more DPNs?
In the wake of the pandemic, the ATO temporarily paused its debt recovery processes. However, this leniency has ended, and the ATO has resumed aggressive debt collection efforts.
As the ATO targets unpaid taxes, directors must act quickly when receiving a DPN to avoid personal liability. Our team of experts can help you navigate these challenges and explore the best options for your circumstances.
Number of DPNs issued in FY22-23
[Include stats reference here]
Increase in DPNs in FY22-23 compared to the previous year
[Include stats reference here]
Why is the ATO issuing more DPNs?
In the wake of the pandemic, the ATO temporarily paused its debt recovery processes. However, this leniency has ended, and the ATO has resumed aggressive debt collection efforts.
As the ATO targets unpaid taxes, directors must act quickly when receiving a DPN to avoid personal liability. Our team of experts can help you navigate these challenges and explore the best options for your circumstances.
Number of DPNs issued in FY22-23
[Include stats reference here]
Increase in DPNs in FY22-23 compared to the previous year
[Include stats reference here]
What is a Director Penalty Notice (DPN)?
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
Pay As You Go (PAYG) Withholding
Superannuation Guarantee Charge (SGC)
Goods and Services Tax (GST)
The DPN outlines the unpaid debt and actions required to avoid personal liability.
Types of DPNs: Which have you received?
The ATO issues two types of DPNs, each with specific implications:
21-day DPN (Traditional or Non-lockdown DPN)
Issued when tax debts are overdue but have been reported to the ATO within three months of the due date.
Directors have 21 days to act, with options such as:
Paying the debt in full.
Placing the company into liquidation or Voluntary Administration (VA).
Appointing a Small Business Restructuring Practitioner (SBRP), if total debts are under $1 million.
Directors have 21 days to act, with options such as:
Lockdown DPN
Issued when tax debts remain unreported or unpaid for over three months past the due date.
Directors are immediately personally liable for the debt, with no option to appoint administrators or liquidators to avoid liability.
Key Difference
A 21-day DPN provides time to act, while a Lockdown DPN imposes immediate personal liability.
What should you do after receiving a Director’s Penalty Notice (DPN)?
Receiving a DPN can be daunting, but acting quickly is critical to avoid personal liability. The type of DPN—21-Day or Lockdown—determines your options, so understanding your notice and taking immediate steps is essential to protect yourself and your business.
Step 01
Determine the type of DPN
Understanding whether you’ve received a 21-day or Lockdown DPN will dictate your next steps.
Step 02
Take immediate action
Your options include:
- Repay the debt: Settle the unpaid tax obligations in full to avoid further action.
- Enter a payment plan: Negotiate an instalment agreement with the ATO.
- Liquidate or restructure the company:
- Appoint a liquidator or enter voluntary administration.
- Engage a small business restructuring practitioner if eligible.
- Defend the notice: Use statutory defences if applicable (for example illness or other uncontrollable circumstances).
Step 03
Seek professional advice
Contact us to review your situation and guide you through the most effective response.
Why ignoring a DPN is not an option
Failing to respond to a DPN can result in severe consequences, including:
Personal liability
The ATO can recover unpaid debts from your personal assets.
Legal action
The ATO may initiate court proceedings, asset seizure, or wage garnishment.
Garnishee Notices
The ATO can recover funds directly from your bank account or other sources.
Credit impact
DPNs can damage your credit score, limiting future borrowing options.
As a former director, can you be affected by a wind-up notice?
Even after stepping down as a director, you’re not automatically free from garnishee notice implications. The ATO can still hold you responsible for:
- PAYG withholding
- Superannuation Guarantee Charge
- Net GST liabilities
These responsibilities cover reporting periods that begun during your directorship.
If you learn of a garnishee notice affecting a company where you were previously a director, seek immediate advice to understand your position.
How AVA Advisory can help
At AVA Advisory, we simplify the complex and stressful process of responding to a Director Penalty Notice (DPN). Our experienced team provides the guidance and expertise you need to protect your assets and achieve the best outcome.
Clear DPN assessment
We carefully review the notice to determine its type (21-day or Lockdown) and explain your obligations, timelines, and next steps. This ensures you fully understand your position and available options.
Customised debt solutions
Our tailored strategies include negotiating payment plans, restructuring debts, or guiding you through liquidation if necessary. We focus on providing practical and effective solution for your unique situation.
Administration guidance
If Voluntary Administration (VA) or liquidation is required, we help manage the process from start to finish, ensuring compliance and minimising risks to your personal assets.
Collaborative legal support
While we don’t provide legal services, we work closely with insolvency lawyers to explore defences, assess DPN validity, and address any legal complexities, giving you a comprehensive response plan.
FAQs
Find answers to common questions about Director’s Penalty Notice (DPN).
A DPN is a notice issued by the ATO, holding company directors personally liable for unpaid tax obligations such as PAYG withholding, GST, or superannuation. It’s a tool the ATO uses to recover outstanding debts when a company fails to comply with its tax obligations.
You may receive a DPN if your company has defaulted on its tax obligations, either by failing to pay or report PAYG withholding, GST, or superannuation liabilities on time.
- 21-day DPN: Allows directors 21 days to act (eg. pay the debt, enter a payment plan, or appoint an administrator) to avoid personal liability.
- Lockdown DPN: Imposes immediate personal liability if tax obligations were not reported within three months of the due date. No action can reverse liability.
Yes, former directors may still be liable if the tax obligations were due before their resignation or relate to events that occurred while they were still a director.
Act immediately by determining the type of DPN and contacting an insolvency practitioner. Options may include:
- Paying the debt.
- Entering a payment plan.
- Placing the company into liquidation or voluntary administration.
- Exploring defences if applicable.
Limited defences include:
- Illness or other extraordinary circumstances beyond your control.
- No reasonable steps were available to prevent the company’s non-compliance.
- Reasonable attempts were made to comply with obligations.
If you become personally liable under a DPN, the ATO can recover debts directly from your personal assets, including bank accounts, property, or wages.
While a payment plan may not absolve you of liability, the ATO is less likely to pursue individual directors if the company is actively adhering to a formal repayment arrangement.
AVA Advisory provides expert guidance on reviewing your financial position, exploring payment or restructuring options, and navigating the ATO’s processes. We work to protect your personal assets while helping you resolve company tax debts.
You have 21 days to act on a Traditional DPN. However, a Lockdown DPN imposes immediate liability, requiring prompt expert advice.
Yes, it may be possible to negotiate a payment plan or settlement with the ATO. An insolvency practitioner or debt management adviser can assist with these discussions.
Yes, unresolved DPNs can affect your credit score, making it more difficult to obtain loans or credit in the future.
The ATO can issue garnishee notices alongside or after a DPN. These notices allow the ATO to recover debts directly from your bank accounts or other sources.
- Contact a debt management or insolvency professional immediately.
- Understand the type of DPN and your available options.
- Act quickly to protect your personal assets and resolve the debt.
Still have questions?
Get in touch for more information.
Join us on the journey to resilience
At AVA Advisory, we believe that every business deserves the chance to not just survive but thrive. Our team is here to provide the expert guidance, personalised solutions, and empathetic support you need to overcome financial challenges and achieve long-term success. Whether you’re facing insolvency, struggling with debt, or looking for ways to improve your financial management, we’re here to help.
Say hello
Reach out to our friendly team for an obligation-free, cost-free consultation. Share details of your situation and concerns in confidence. Clarity, relief, and a brighter future for you and your business are only a few steps away.
