Key Takeaways
- The ATO issued over 84,000 Director Penalty Notices in 2024–25 — a 136% increase on the prior year
- DPNs make directors personally liable for unpaid PAYG withholding, superannuation guarantee, and GST
- You have only 21 days to respond to a non-lockdown DPN before the ATO can pursue you personally
- A lockdown DPN creates immediate personal liability with no way to remit the penalty — except by paying the debt in full
- With 30 June 2026 approaching, the ATO is intensifying enforcement — directors must act now to protect themselves
- The Tax Ombudsman has announced a formal review of the ATO’s DPN practices in 2026
If you are a director of an Australian company, the Australian Taxation Office wants you to know something: it is coming for unpaid tax debts, and it is using Director Penalty Notices to make you personally responsible.
The numbers are stark. In the 2024–25 financial year, the ATO issued more than 84,000 Director Penalty Notices — a 136% increase on the prior year. The ATO’s total collectable debt has reached a record $105 billion. And with the end of the 2025–26 financial year just weeks away, directors across Queensland should expect the ATO’s enforcement activity to intensify further.
At Boss Lawyers, we regularly act for directors who receive DPNs — often at a point where every day counts. This guide explains what a Director Penalty Notice is, how the ATO uses them, and what you can do to protect yourself.
What Is a Director Penalty Notice?
A Director Penalty Notice is a formal notice issued by the ATO under Division 269 of Schedule 1 of the Taxation Administration Act 1953 (Cth). It makes a director personally liable for certain unpaid company tax obligations, specifically:
- PAYG withholding — tax withheld from employee wages
- Superannuation guarantee charge (SGC) — unpaid super contributions
- GST — goods and services tax (from 1 April 2020)
The effect of a DPN is to create a personal tax debt against the director — separate from the company’s liability. The ATO does not need a court order. It simply issues the notice, and if you fail to act within the required timeframe, it can recover the debt from you personally through garnishee notices, legal proceedings, or even a bankruptcy notice.
Why the ATO Is Issuing Record Numbers of DPNs in 2026
During the COVID-19 pandemic, the ATO adopted a deliberately lenient approach to debt collection. Payment plans were extended, enforcement was paused, and many businesses accumulated significant tax debts under the assumption they would have time to recover.
That era is over. Since 2023, the ATO has progressively shifted to what it describes as “firmer recovery strategies.” The results speak for themselves:
- 2022–23: Approximately 26,700 DPNs issued
- 2024–25: Over 84,000 DPNs issued — a 136% increase
- Total ATO collectable debt: $105 billion (a record)
The ATO has made its position clear: directors who allowed their companies to fall behind on PAYG withholding, super, or GST during the pandemic grace period will now face personal consequences. Construction, hospitality, and professional services businesses are being hit particularly hard — sectors where insolvencies have surged by 47% in the past year.
Non-Lockdown DPNs: You Have 21 Days
A non-lockdown DPN is issued when a company has lodged its BAS or SGC statements on time but has not paid the underlying tax. In this scenario, the director has 21 days from the date of the notice to take one of the following actions:
- Pay the debt in full — including any interest and penalties
- Enter into a payment arrangement with the ATO that the ATO accepts
- Appoint a voluntary administrator to the company under Part 5.3A of the Corporations Act 2001
- Appoint a small business restructuring practitioner under Part 5.3B
- Begin winding up the company — either by members’ resolution or court order
If you take one of these steps within 21 days, the director penalty is remitted — meaning you are no longer personally liable for that debt.
If you do nothing, the penalty crystallises and the ATO can pursue you personally. There is no extension. There is no further warning. Twenty-one days is all you get.
Lockdown DPNs: Immediate Personal Liability
A lockdown DPN is far more serious. It applies when a company has failed to lodge its BAS or SGC statements within three months of the due date. In this case:
- The director penalty cannot be remitted by appointing an administrator, restructuring practitioner, or liquidator
- The only way to extinguish the penalty is to pay the debt in full
- Personal liability attaches immediately — even before the notice is issued
This is the trap that catches many directors. They assume that liquidating the company will resolve their personal exposure, but if the relevant returns were not lodged on time, the DPN is locked down and liquidation provides no relief.
The lesson is brutally simple: always lodge on time, even if you cannot pay. Lodging on time preserves your ability to remit a DPN. Failing to lodge removes it entirely.
The ATO’s Enforcement Toolkit Beyond DPNs
DPNs are not the only weapon in the ATO’s arsenal. Once a director penalty has crystallised, the ATO can use several enforcement mechanisms simultaneously:
- Garnishee notices — directing your bank or a debtor to pay money directly to the ATO, without a court order
- Statutory demands — demanding payment of a debt exceeding $4,000, which can trigger winding up proceedings if not complied with
- Legal proceedings — suing the director personally in the Federal Court or state courts
- Bankruptcy notices — if the debt exceeds $10,000, the ATO can commence bankruptcy proceedings against the director individually
- Director ID cross-referencing — using the Director Identification Number (DIN) system to track directors across multiple companies
The ATO has also been sharing data with ASIC. Where it identifies patterns of repeated company failures and DPN non-compliance, ASIC may pursue director disqualification orders under section 206F of the Corporations Act — banning the director from managing companies for up to five years.
Tax Ombudsman Review: Is the ATO Going Too Far?
Not everyone agrees the ATO’s approach is proportionate. In late 2025, Tax Ombudsman Ruth Owen announced that the ATO’s administration of DPNs would be subject to a formal review in 2026.
The review will examine whether the ATO’s DPN practices are fair and reasonable, particularly in cases where:
- Directors were unaware of their personal liabilities
- Directors had ceased their directorships but still received DPNs
- Personal circumstances — such as illness or family crisis — prevented active involvement in the company
- The company had engaged with the ATO in good faith but still received enforcement action
The review acknowledges what insolvency practitioners and commercial lawyers have been saying for years: the DPN regime can produce harsh outcomes for directors who are unsophisticated, unwell, or simply unaware of their legal obligations.
However, the review is unlikely to change the current law. Directors should not wait for its outcome — the current rules apply now, and the ATO is enforcing them aggressively.
End of Financial Year: Why June 2026 Is Critical
The end of the financial year on 30 June 2026 creates a perfect storm for DPN exposure:
- BAS lodgement deadlines are approaching — any BAS not lodged within three months of its due date triggers lockdown DPN exposure
- Superannuation guarantee statements for Q3 (January–March 2026) were due by 28 April 2026 — directors who have not lodged are already at risk
- Annual reconciliation of PAYG and super obligations will reveal shortfalls
- The ATO historically ramps up enforcement activity in the final quarter of the financial year
If your company has outstanding BAS returns, unpaid super, or accumulated PAYG withholding debts, the time to act is now — not after 30 June when the ATO’s next wave of DPNs lands.
Common Mistakes Directors Make When They Receive a DPN
In our experience acting for directors facing DPNs, these are the most common — and most costly — mistakes:
1. Ignoring the Notice
A DPN is not a warning letter. It is a legal instrument that creates personal liability. Ignoring it does not make it go away — it makes the penalty irrevocable after 21 days.
2. Assuming Liquidation Will Fix Everything
Liquidation only remits a non-lockdown DPN. If the company’s returns were not lodged on time, the DPN is locked down and liquidation provides no personal relief. Many directors discover this too late.
3. Not Checking Historical Lodgements
The ATO can issue DPNs for tax periods going back several years. Directors who assumed their accountant was lodging on time are often shocked to discover gaps in their lodgement history. Check your company’s lodgement status on the ATO portal immediately.
4. Resigning to Avoid Liability
Resigning as a director does not extinguish DPN liability for debts that arose while you were a director. The obligation is retrospective. You remain liable for the period during which you held office.
5. Not Getting Legal Advice Early Enough
With only 21 days to act on a non-lockdown DPN, every day matters. Directors who delay seeking advice often find their options have narrowed or disappeared entirely by the time they engage a lawyer.
What to Do If You Receive a Director Penalty Notice
If you have received a DPN — or you suspect one is coming — take these steps immediately:
- Read the notice carefully — identify whether it is a lockdown or non-lockdown DPN, and note the 21-day deadline
- Check your company’s ATO lodgement history — verify that all BAS, PAYG, and SGC returns have been lodged on time
- Quantify the total exposure — understand exactly how much the ATO says you owe personally
- Get legal advice immediately — a commercial lawyer experienced in insolvency and director liability can assess your options and help you act within the deadline
- Consider your restructuring options — voluntary administration, small business restructuring, or a creditors’ voluntary liquidation may be appropriate depending on your company’s circumstances
- Do not pay without advice — in some cases, paying the DPN amount may not be the best strategy if the company has other debts or if the director penalty can be challenged
Can You Challenge a Director Penalty Notice?
In limited circumstances, yes. The director penalty regime does not provide a formal objection process in the way that a notice of assessment does. However, directors may be able to challenge a DPN where:
- The underlying tax assessment is incorrect — for example, if the company was not liable for the PAYG withholding or SGC amount claimed
- The director was not a director at the relevant time — the ATO sometimes issues DPNs to former directors or to persons who were never validly appointed
- The DPN was not properly served — the ATO must comply with the service requirements under the Taxation Administration Act
- The company had a genuine dispute about the debt, and the ATO failed to consider it before issuing the DPN
Challenging a DPN requires specialist legal advice. The timeframes are tight and the consequences of getting it wrong are severe.
How Boss Lawyers Can Help
Boss Lawyers is experienced in acting for directors facing DPNs and personal liability claims arising from company tax debts. We regularly assist directors to:
- Assess the DPN and determine whether it is lockdown or non-lockdown
- Identify the most effective strategy to remit or challenge the penalty within the 21-day deadline
- Navigate voluntary administration, small business restructuring, or liquidation where appropriate
- Negotiate with the ATO on payment arrangements or disputed assessments
- Defend garnishee notices, statutory demands, and legal proceedings brought by the ATO
- Advise on broader director liability exposure including insolvent trading and ASIC disqualification risk
If you have received a Director Penalty Notice, do not wait. Call Mark Harley on 1300 267 711 or contact us online to discuss your situation. Every day you delay narrows your options.
Frequently Asked Questions
How long do I have to respond to a Director Penalty Notice?
You have 21 days from the date the DPN is issued to take one of the permitted actions: pay the debt, enter a payment arrangement, appoint an administrator, appoint a small business restructuring practitioner, or begin winding up the company. If the DPN is a lockdown notice (because the relevant returns were not lodged within three months of the due date), the penalty cannot be remitted by these actions — only by payment in full.
Can I be personally liable for a DPN after I resign as director?
Yes. Resigning as a director does not remove your liability for director penalties that relate to the period when you held office. The obligation is retrospective — it attaches to the person who was director when the company’s PAYG withholding, super, or GST obligation arose. However, you will not be liable for obligations that arose after you ceased to be a director, provided you were not a “shadow director” exercising influence over the company’s affairs.
What is the difference between a lockdown and non-lockdown DPN?
A non-lockdown DPN is issued when the company lodged its returns on time but did not pay. You can remit the penalty within 21 days by paying, entering an arrangement, or placing the company into administration or liquidation. A lockdown DPN is issued when the company failed to lodge its returns within three months of the due date. In this case, the penalty cannot be remitted — the only option is to pay the full amount. This is why timely lodgement is critical, even when a company cannot pay.
Can the ATO issue a DPN for GST debts?
Yes. Since 1 April 2020, the DPN regime has been expanded to include GST debts. This means that directors can be held personally liable for unpaid GST in the same way as PAYG withholding and superannuation guarantee. This change significantly expanded the scope of director exposure, particularly for businesses with large GST liabilities.
Will the Tax Ombudsman’s review change the DPN rules?
The Tax Ombudsman’s 2026 review of the ATO’s administration of DPNs is focused on how the ATO uses and administers DPNs — not on changing the law itself. The review may lead to recommendations about how the ATO should exercise its discretion, particularly in cases involving vulnerable directors or unusual circumstances. However, the current DPN laws remain in force and the ATO continues to enforce them actively. Directors should not delay action in anticipation of the review’s outcome.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
Mark Harley
Principal Solicitor
Boss Lawyers Pty Ltd
Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Phone: 1300 267 711
