19 Jun 2026So you are a director of a company and you’ve received a Director Penalty Notice (DPN). Here’s a rundown on what that means and what you should do next.
What is a Director Penalty Notice?
A DPN is a notice issued by the Australian Taxation Office (ATO) that can make you, as a company director, personally liable for certain unpaid company tax and superannuation liabilities. DPNs can be issued in relation to unpaid PAYG withholding, GST or superannuation guarantee charge (SGC) owed by the company.
A DPN can also be issued to multiple directors of the same company and the liability is a parallel liability. This means that payment by the company reduces the liability of the director(s), and payment by one director reduces the corresponding liability of the company and other directors.
The ATO must give you a DPN before it commences any recovery action against you personally, as a director.
If you’ve received a DPN, you have 21 days to act, with the clock starting from the date the DPN is posted or left at your ASIC-registered address, not from the date of actual receipt.
What are the different types of Director Penalty Notices?
There a two main types of DPNs. The first, a non-lockdown DPN, is where the relevant PAYG or GST liabilities were reported within three months of the due date. In that case, the penalty may be cancelled within the 21-day period if the company pays the debt, appoints an administrator, appoints a small business restructuring practitioner, or begins to be wound up.
The other type, a lockdown DPN, is where the relevant liabilities were reported more than three months late (and, for SGC, where the SGC statement was not lodged by the due date). In that case, the penalty is generally only cancelled by payment of the underlying liability. Appointing an administrator or liquidator will not avoid you being personally liable for the debt.
What to do if you receive a Director Penalty Notice
If you’ve received a DPN, you must confirm the date of issue immediately, as time is critical. Confirm when the DPN was posted or delivered to the ASIC address (remembering this is not when it was received by you) and confirm when the response is due.
Identifying whether the DPN is lockdown or non-lockdown will determine whether insolvency appointments can still cancel the penalty, or whether payment is the only practical option.
You should then verify the underlying liabilities, by checking the relevant BAS, instalment activity statements, SGC statements, assessments, lodgements and payment history to determine whether the amounts, periods and reporting status are correct. You should speak with your company’s accountant about this.
It is important to consider your options within time. Depending on the type of DPN, you can cancel the DPN by full payment, appointing an administrator, appointing a small business restructuring practitioner, or commencing winding up of the company. Consider which option you can work with and what the company can pursue.
Finally, you need to assess whether a statutory defence is available, as you may be able to avoid liability if a valid defence can be established and properly advanced.
Do you have grounds of defence?
The available defences are narrow and are construed strictly. In substance, they include non-participation due to illness or other acceptable reason. This defence may be available if you did not take part in management during the relevant period, and it would have been unreasonable to expect you to do so because of illness or another acceptable reason.
The second is an “all reasonable steps” defence, which is available if you can satisfy the ATO that you took all reasonable steps to ensure that the company paid the liability, or that an administrator, small business restructuring practitioner, or liquidator was appointed.
Both of these defences must cover the whole of the relevant period and must be supported by evidence. You will need to gather all contemporaneous documents that support the defence (including communications, medical evidence, board minutes etc), prepare written submissions to the Commissioner, clearly set out your defence and attach the supporting documents.
How can Stacks Davis Lawyers assist?
We can help you by determining whether the DPN is valid, identifying whether it is a lockdown or non-lockdown DPN, analysing the company’s reporting history, advising on the most effective option to have the DPN cancelled within the 21-day statutory period; and preparing a properly evidenced defence submission to the Commissioner.
We can coordinate with insolvency practitioners and accountants, manage communications with the ATO and advise on related exposure, such as recovery proceedings, garnishee action, contribution claims between directors and the consequences for former or newly appointed directors.
