Key Takeaways
- The Tax Ombudsman launched a formal review of the ATO’s administration of Director Penalty Notices (DPNs) on 2 September 2026, the first systemic review of the DPN regime.
- In 2024–25, the ATO issued more than 84,000 DPNs to directors of approximately 64,000 companies, a 136% increase year on year.
- The review will examine whether the ATO’s communications, debt recovery processes, and responses to vulnerability (including coerced directorships) are adequate and consistent.
- The review does NOT suspend the ATO’s power to issue DPNs. Directors remain personally liable while the review is underway. The 21-day clock still runs.
- The final report is expected in April 2027. Directors with existing or anticipated DPN exposure should get legal advice now, not after the report lands.
On 2 September 2026, the Inspector-General of Taxation and Tax Ombudsman (IGTO) formally opened its review of the Australian Taxation Office’s administration of Director Penalty Notices. It is the first systemic, independent review of the DPN regime. Consultation closes 29 September 2026, with the final report expected by April 2027.
For Queensland directors, this is significant context, but it is not a stay of execution. The ATO continues to issue DPNs at record levels. The review does not pause the regime. If you have received a DPN, or your company has unpaid PAYG withholding, GST, or superannuation guarantee charge (SGC) obligations, you need to act within the existing framework while this review runs its course.
What Is a Director Penalty Notice?
A Director Penalty Notice is a formal demand issued by the ATO under Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth). When a company fails to remit certain tax obligations, including PAYG withholding (PAYGW), GST, and superannuation guarantee charge (SGC), the ATO can issue a DPN to each director personally, making them individually liable for the company’s unpaid debt.
There are two types of DPN and the distinction matters enormously:
| Type | When it applies | Director’s options |
|---|---|---|
| Non-lockdown DPN | BAS/SGC statements are lodged within 3 months of due date | Pay the debt, appoint a liquidator, or appoint a voluntary administrator within 21 days to discharge liability |
| Lockdown DPN | BAS/SGC statements are more than 3 months overdue at the time the DPN is issued | Personal liability is fixed and it cannot be discharged by administration or liquidation. The director must pay personally. |
The 21-day period in a non-lockdown DPN is not a guideline. It is a hard deadline. If the director does not act within 21 days, the ATO can sue the director personally in any court of competent jurisdiction.
Why the Tax Ombudsman Is Reviewing the Regime Now
The 2024–25 financial year produced a stark set of numbers. The ATO issued 84,000 DPNs to directors of approximately 64,000 companies, a 136% increase over the prior year. The ATO collected approximately $2.1 billion through DPN-related action in that period.
The sheer volume of DPNs has created systemic concerns the IGTO considers warrant independent scrutiny. Three specific areas are under the microscope:
- Communication adequacy: Whether the ATO provides current and former directors with adequate and timely information about their DPN obligations, the underlying tax debt, and the actions available to them before and after a DPN is issued.
- Consistency of the debt recovery process: Whether the ATO appropriately and consistently takes individual directors’ circumstances into account during the recovery of DPN-related debts.
- Vulnerability and coerced directorships: Whether the ATO adequately identifies and responds to situations involving vulnerability, financial abuse, or coerced directorships, including cases where a director was appointed by a third party who then ran the company without the director’s meaningful involvement.
The coerced directorship angle is particularly important. There is a growing pattern of individuals, often family members or people in financially precarious positions, being appointed as directors of companies they had no real control over, only to find themselves personally liable for six-figure DPN debts they knew nothing about. The IGTO has specifically flagged this as an “increasing area of concern” in the terms of reference.
What the Review Does NOT Do
This point cannot be stated clearly enough: the Tax Ombudsman review does not suspend, limit, or alter the ATO’s power to issue Director Penalty Notices.
The DPN regime continues to operate as normal while the review runs. Directors who receive a DPN during the review period face the same 21-day deadline, the same lockdown risk, and the same personal liability consequences as they did before 2 September 2026. The review may lead to recommendations that the ATO change its approach, but that will not occur until the final report is published in April 2027 at the earliest, and implementation of any recommendations would follow after that.
If you have received a DPN, or if your company’s BAS or SGC statements are overdue, the Tax Ombudsman review is not a reason to wait.
What the Review Might Change and What It Won’t
The IGTO is an independent body that reviews the ATO’s administration. It does not make law. Its recommendations are not legally binding, though the ATO typically responds to IGTO recommendations with some level of process change.
If the review follows the IGTO’s typical pattern, directors might see:
- Improved pre-DPN communications, including earlier warnings before the DPN is formally issued
- A more documented hardship assessment process for directors who raise vulnerability
- Clearer guidance on the evidentiary threshold for raising a coerced directorship argument
- Possibly, a recommendation for a formal dispute resolution pathway specific to DPN challenges
What the review is very unlikely to change: the existence of the DPN regime, the lockdown mechanism for overdue lodgements, or the ATO’s fundamental authority to recover unpaid PAYGW, SGC, and GST from directors personally. These are statutory provisions. The IGTO cannot recommend legislative change. That is a matter for Parliament.
The Payday Super Dimension
The IGTO review arrives at exactly the moment the DPN regime has expanded in practical scope. From 1 July 2026, Payday Super commenced. Employers must now pay superannuation within 7 days of each pay cycle. For directors, this compresses the window within which a missed SGC payment can accumulate before triggering DPN risk.
Under the old quarterly SGC framework, a director might have months before overdue SGC lodgements crossed the 3-month threshold that triggers lockdown DPN exposure. Under Payday Super, SGC obligations arise with each payroll cycle, and the SGC rate has increased to 12% from 1 July 2026. A director whose company misses several weekly payroll cycles can find themselves in lockdown DPN territory far faster than under the old quarterly regime.
The Tax Ombudsman review does not directly address Payday Super, but the regime change is directly relevant background. Directors and company administrators who are navigating the first months of Payday Super compliance should treat this as a heightened DPN risk environment, not a normal one.
Former Directors Are Not Off the Hook
One of the specific concerns flagged in the IGTO’s terms of reference is the position of former directors. A director who has resigned from a company remains potentially liable for DPN debts that were incurred, or whose lodgements became more than 3 months overdue, during their tenure. The ATO’s expanded enforcement posture means former directors are actively being issued DPNs for periods of company management that may have concluded years ago.
The IGTO has specifically called out the adequacy of communications to former directors as a review concern. This suggests the IGTO has received complaints from former directors who received a DPN without adequate prior notice, a situation that is not unusual given that the ATO’s default contact address for a former director may be outdated.
Former directors with any period of management of a company that had ATO obligations should check their exposure now. If you resigned from a company that had PAYGW, SGC, or GST arrears, you are not automatically clear. The liability attaches to the period of your appointment, not the date of the DPN.
Six Steps for Queensland Directors Facing DPN Risk
- Check your ASIC register status. Confirm whether you are still listed as a current director of any company. ASIC records are the starting point for ATO DPN identification. Former directors who are still incorrectly listed on ASIC records face a compounded risk.
- Obtain a complete ATO debt position. Before doing anything else, establish exactly what the company owes (PAYGW, SGC, and GST) and whether any lodgements are overdue. This determines whether a lockdown DPN risk already exists.
- Do not ignore a DPN if you receive one. The 21-day period runs from the date of the notice. The ATO does not need to negotiate. Acting inside the window preserves options; acting outside the window closes them permanently for a lockdown DPN.
- Assess whether the DPN is correctly issued. DPNs can be set aside or challenged on limited grounds, including that the director had resigned before the relevant period, that the debt was incorrectly calculated, or (in coerced directorship cases) that the director had no genuine management role. These challenges require immediate legal advice because of the 21-day window.
- Consider voluntary administration as an option (non-lockdown DPN only). If the company’s BAS and SGC statements are current, a non-lockdown DPN can be discharged by placing the company into voluntary administration within 21 days. This requires planning and legal advice. It is not a decision to make unilaterally on day 20.
- Engage a commercial lawyer, not an accountant, for DPN strategy. Accountants can assist with lodgements and payment arrangements. They cannot represent you in court if the ATO commences proceedings, challenge the DPN’s legal validity, or advise on administration strategy. DPN liability at the scale the ATO is currently pursuing is a legal problem.
Frequently Asked Questions
Does the Tax Ombudsman review mean the ATO will stop issuing DPNs?
No. The review examines how the ATO administers the DPN regime, not whether the regime should exist. DPN issuances continue at full pace while the review runs. The review may lead to process improvements by April 2027, but the ATO’s power to issue DPNs is unaffected.
Can I use the Tax Ombudsman review to challenge a DPN I have received?
No. The review does not provide a mechanism to challenge or set aside an individual DPN. If you have received a DPN and believe it has been incorrectly issued, the pathways are: responding to the ATO within 21 days with legal advice, applying to the Administrative Review Tribunal, or, where a lockdown DPN is alleged to be incorrectly computed, pursuing a challenge through the Federal Court. Submitting to the IGTO review process does not suspend or extend the 21-day deadline.
What is a coerced directorship and how does it affect DPN liability?
A coerced directorship occurs where someone is appointed as a director by another person (often a partner, employer, or criminal associate) who then operates the company without the director’s meaningful involvement or consent. The appointed director is legally a director. The Corporations Act does not distinguish between willing and unwilling appointments, and can face full DPN liability for the company’s unpaid PAYGW, SGC, and GST. The IGTO review is specifically examining whether the ATO’s approach to these situations is appropriate. If you were appointed as a director without genuinely running the company, legal advice is essential before the ATO takes recovery action.
I resigned as director 18 months ago. Can I still receive a DPN?
Yes. The ATO can issue a DPN in respect of obligations that arose during your period as a director, even if you have since resigned. Resignation does not extinguish DPN liability for debts that accrued or lodgements that became overdue during your tenure. If the company’s lodgements were more than 3 months overdue when you resigned, a lockdown DPN may be validly issued to you even now.
The consultation closes 29 September 2026. Should I make a submission?
Directors, former directors, advisers, and community organisations with DPN experiences are encouraged by the IGTO to participate. Submissions can be made by webinar (10, 15, and 16 September 2026), online survey, email, or post. Participation in the review does not affect any individual’s DPN liability and does not constitute legal advice or a challenge to a DPN.
Director Penalty Notice? Talk to a Lawyer Before the 21-Day Clock Runs Out.
Boss Lawyers advises Queensland directors on DPN response strategy, lockdown DPN challenges, and voluntary administration options. Contact Mark Harley on 1300 267 711 or via bosslawyers.com.au/contact/ for clear advice on your options.
For legal advice on Director Penalty Notice obligations and your options in Queensland, contact the insolvency lawyers Brisbane team at Boss Lawyers on 1300 267 711.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
