What to Do If You Receive a Director Penalty Notice
If you receive a Director Penalty Notice (DPN) from the Australian Taxation Office (ATO), take five steps: check the DPN type and the date on the notice; confirm which debts it covers (PAYG withholding, GST or superannuation guarantee charge); get outstanding lodgements current; assess your options with a qualified professional; and, if it is non-lockdown, act within 21 days of the notice date — paying the debt or appointing a small business restructuring practitioner, voluntary administrator or liquidator remits your personal liability. (ATO)
If you have just opened one of these letters, take a breath. A DPN is serious, but it comes with a defined process and, in most cases, a defined window in which good decisions are still available. Directors receive these notices every week, and there is a well-worn path for responding. This page walks through it step by step.
If you would rather talk it through with a person first, call 0468 061 936. The conversation is confidential and there is no obligation.
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Step-by-step: how to respond to a Director Penalty Notice
A DPN is issued under Division 269 of Schedule 1 to the Taxation Administration Act 1953, and the ATO’s own director penalty notice guidance sets out how the liability, the deadline and the remission options work. Here is how to respond, in order:
- Check the DPN type and the date on the notice. Find the date at the top of the notice first. For a non-lockdown DPN, the 21-day window runs from the date the ATO issued the notice — not from the day the letter arrived. The notice also sets out which amounts are remittable and which are locked down, so read it carefully; a single DPN can include both.
- Confirm which debts it covers. A DPN can cover unpaid PAYG withholding, GST and superannuation guarantee charge (SGC). Check the amounts and periods listed in the notice against the company’s records and ATO accounts, so you know exactly what you are being held personally liable for — and whether any figures are ATO estimates rather than lodged amounts.
- Get outstanding lodgements current. Lodge any overdue BAS and SGC statements now, even if the company cannot pay. Lodging replaces ATO estimates with actual figures, keeps future periods on the remittable side of the lockdown line, and is a practical precondition for options such as small business restructuring.
- Assess your options with a qualified professional. Before you pay anything, sign anything, or move any assets, talk to a qualified adviser who deals with DPNs — an accountant, insolvency practitioner or specialist advisory. The right response depends on the DPN type, whether the company is viable, and your personal position, and some steps cannot be undone once taken.
- Act within the 21-day window if it is non-lockdown. For a non-lockdown DPN, your personal liability is remitted only if, within 21 days of the date of the notice, the company pays the debt in full or a small business restructuring practitioner, voluntary administrator or liquidator is appointed. After day 21, those appointments stop remitting the penalty and the ATO can begin recovery against you personally.
Sources: ATO — Director penalty notices; Division 269, Schedule 1, Taxation Administration Act 1953.
How to tell if your DPN is lockdown or non-lockdown
Whether a DPN is lockdown or non-lockdown is decided by when the company lodged, not when it paid — and everything about your response depends on that distinction.
Under the ATO’s rules:
- PAYG withholding and GST amounts reported within 3 months of the due date are non-lockdown — the 21-day remission options apply. Amounts reported more than 3 months late, or not at all, are locked down.
- Superannuation guarantee charge is stricter: the SGC statement must have been lodged by its due date (1 month and 28 days after the end of the relevant quarter) — the 3-month rule applies only to PAYG withholding and GST. If the SGC statement was not lodged by its due date, the penalty is locked down.
Pull up the company’s lodgement history — your accountant or tax agent can do this quickly — and compare each period on the notice against when it was actually lodged. The notice itself also states which amounts are remittable and which are not.
If some or all of your notice is locked down, the 21-day appointments will not remove that liability, and the strategy changes: the focus shifts to checking the figures, statutory defences, payment arrangements and your personal position. Our lockdown DPN guide covers that situation in detail. If your notice is non-lockdown, the 21-day deadline guide explains exactly how the window is counted and what remits the penalty.
Your options, compared
For a non-lockdown DPN, four actions remit the personal liability if taken within the 21 days (ATO):
| Option | What it involves | Effect on a non-lockdown DPN |
|---|---|---|
| Pay the debt in full | The company (or you) pays the amounts covered by the notice | Discharges the penalty |
| Small Business Restructuring (SBR) | An ASIC-registered practitioner helps the company propose a debt restructuring plan to creditors while directors stay in control | Remits the penalty if the practitioner is appointed within 21 days |
| Voluntary administration | An ASIC-registered administrator takes control of the company to resolve its position with creditors | Remits the penalty if the administrator is appointed within 21 days |
| Liquidation | An ASIC-registered liquidator winds the company up in an orderly way | Remits the penalty if winding up begins within 21 days |
An ATO payment plan is a fifth, partial tool: it can manage how a debt is paid, but it does not remit a director penalty. For the full comparison — including which option tends to suit which situation — see the options table on our DPN hub page. If ATO debt is the wider problem beyond this one notice, our ATO debt page covers payment plans and negotiation in more depth.
Remember: none of the insolvency appointments remits a lockdown DPN. They can still be the right decision for the company, but the personal liability has to be handled separately.
If you’re weighing two of these and can’t tell which fits, that’s exactly what a first call is for. 0468 061 936 — confidential, no obligation.
Common mistakes directors make with a DPN
The five most common DPN mistakes are ignoring the notice, mis-counting the 21 days, paying the wrong debt first, waiting for the ATO to call, and shuffling assets informally. All of them are avoidable.
- Ignoring the notice and hoping the ATO moves on. It will not. Once the 21 days pass, the penalty is recoverable from you personally — the ATO can garnishee your accounts or income, offset your personal tax refunds, and commence court proceedings (ATO).
- Counting the 21 days from the day the letter arrived. The window runs from the date of the notice. The ATO posts DPNs to the director’s address recorded with ASIC — if that address is out of date, the notice is still validly given, and days may already have passed before you read it.
- Paying the wrong debt first. A partial payment, or a payment toward other tax accounts, may not reduce the specific amounts covered by the DPN. How payments are applied matters — get advice before you pay anything, so every dollar counts toward the liability that has your name on it.
- Waiting for the ATO to call and negotiate. The DPN is the escalation. The window does not pause while you wait for a phone call, a payment-plan letter, or a response to a complaint. Treat the notice itself as the conversation.
- Shuffling assets informally. Transferring company assets to a new entity for less than they are worth, moving assets out of reach of creditors, or backdating documents is illegal phoenix activity — creditor-defeating conduct that carries serious civil and criminal penalties for directors and their advisers (ASIC). It also does nothing to remove a director penalty. If someone is advising you to do this, walk away. The lawful options above exist precisely so you do not have to gamble on unlawful ones.
The common thread: directors who get advice early avoid all five.
How Restructure Partners can help
Restructure Partners is an Australian specialist restructuring and insolvency advisory. When a DPN arrives, we help directors do three things quickly: work out which type of notice they are holding and what the real deadline is, understand the options honestly — including the ones that involve hard decisions — and, where a formal appointment is the right path, connect with ASIC-registered liquidators and restructuring practitioners who can act within the window. Only registered practitioners can administer small business restructuring, voluntary administration or liquidation; our role is to make sure you reach that point informed, prepared and in time.
What we will not do is promise outcomes. Anyone who guarantees they can make a DPN disappear is not being straight with you. What we can promise is a clear explanation of where you stand and what your genuine options are.
Call 0468 061 936 for a confidential, no-obligation conversation — or send your details through our enquiry form and we will come back to you as soon as we can, and always confidentially. If your notice is non-lockdown, every day inside the 21 counts, so earlier is genuinely better.
Frequently asked questions
How long do I have to respond to a Director Penalty Notice?
For a non-lockdown DPN, you have 21 days from the date of the notice to pay the debt or have a small business restructuring practitioner, voluntary administrator or liquidator appointed. A lockdown DPN has no remission window — the personal liability has already attached — but you should still get advice quickly about the figures, possible defences and payment arrangements.
Does the 21 days start when I receive the letter?
No. The 21 days runs from the date the ATO gives the notice — the date printed on it, which is when the ATO posts it — not from the day it lands in your hands. The ATO posts DPNs to the director’s address recorded with ASIC, so days can be lost in the mail before you even open the envelope. Check the notice date first and count forward from there.
What happens if I ignore a DPN?
If a DPN is ignored, the director penalty becomes recoverable from the director personally. The ATO can garnishee your bank accounts or income, offset your personal tax refunds against the debt, and start court proceedings against you. Ignoring the notice also removes options — for a non-lockdown DPN, the appointments that would have remitted your liability stop working after day 21.
Will an ATO payment plan cancel my director penalty?
No. Entering a payment plan does not remit a director penalty. For a non-lockdown DPN, only full payment of the debt, or the appointment of a small business restructuring practitioner, voluntary administrator or liquidator within the 21 days, remits the liability. A payment plan can still be a sensible way to manage the debt — but it does not switch the penalty off.
Can I resign as a director to avoid the DPN?
No. Resigning does not remove liability for penalties relating to debts that arose while you were a director. New directors are not liable for a company’s pre-existing unpaid amounts if, within 30 days of their appointment, the company pays the debt or an administrator, restructuring practitioner, or liquidator is appointed — and resigning within those 30 days does not avoid it. Resigning after a DPN has issued does nothing for the amounts already covered by the notice.
Can Restructure Partners appoint an administrator or liquidator for me?
No. Only ASIC-registered insolvency practitioners can accept formal appointments such as small business restructuring, voluntary administration or liquidation. Restructure Partners is an Australian specialist restructuring and insolvency advisory — we help you understand what the notice means and what your options are, and we can connect you with registered practitioners if a formal appointment turns out to be the right path.
What if the company cannot pay the debt?
Inability to pay does not make a DPN go away, but it does not leave you without options either. If the business is viable, small business restructuring or voluntary administration can deal with the debt through a formal process. If it is not viable, liquidation may be the responsible step. For a non-lockdown DPN, any of those appointments within the 21-day window also remits your personal liability.
Sources: ATO — Director penalty notices · Taxation Administration Act 1953, Schedule 1, Division 269 (legislation.gov.au) · ASIC — Illegal phoenix activity
This page is general information only, not legal or financial advice. Director penalty rules turn on the specific dates, amounts, and lodgement history in your case. Seek advice from a qualified professional about your own circumstances before acting.