Quick Answer
A director penalty notice (DPN) is a letter from the ATO that makes you personally liable for your company’s unpaid PAYG withholding, GST, or super guarantee charge. You have 21 days to act. The right response depends on whether it’s a lockdown or non-lockdown notice and on what your company has already lodged.
What is an ATO director penalty notice and why are more directors getting them?
A director penalty notice is the ATO’s formal way of transferring your company’s unpaid tax debt onto you personally. Once issued, you’re on the hook in the same way the company is — what’s called a parallel liability. The Tax Office can pursue you, the company, or both at once for the same dollars until the debt is cleared.
Three categories of company debt can become a director’s personal problem this way:
- PAYG withholding — the tax withheld from employee wages
- GST — collected on sales but not paid over to the ATO
- Super guarantee charge (SGC) — unpaid superannuation, plus interest and the admin component
Notice volumes are nothing like they were five years ago. The ATO largely paused recovery during COVID, and the backlog of debt is now being worked through aggressively. Director penalty notices, garnishee notices, and statutory demands have all climbed sharply since 2023, and the Tax Office has been public about its intent to keep that pressure on — especially for businesses that have stopped lodging or repeatedly defaulted on payment arrangements.
You can receive a DPN even if you’re no longer running the company. Three categories of director are exposed:
- Current directors are liable for any unpaid PAYG, GST or super
- Former directors remain liable for amounts relating to periods when they were still in the role — including amounts that only became reportable after they resigned
- New directors appointed to a company with existing tax debts have 30 days from appointment to ensure the company either pays, appoints an administrator, appoints a small business restructuring practitioner, or starts winding up. Miss that window and old debts attach to them personally
Resigning does not wash the slate clean. Courts have confirmed that repeatedly.
How does a lockdown DPN differ from a 21-day DPN?
The single most important thing to work out when a DPN lands on your desk is which type you’ve received. The two notices look similar but have very different consequences.
The trigger is whether the company lodged its returns on time. For PAYG and GST, if the company reported the liability within three months of the due date — even without paying — the resulting notice is a 21-day DPN, also called a non-lockdown DPN. You still have options. If the company lodged more than three months late, or never lodged at all, the notice is a lockdown DPN, and the only path out is paying the debt in full.
Super is harsher. For SGC, the cut-off is the SGC due date itself, not three months after. If the SGC statement isn’t lodged by that due date, any later DPN is automatically a lockdown notice.
| Feature | 21-day (non-lockdown) DPN | Lockdown DPN |
|---|---|---|
| When it’s issued | Debt reported on time — within 3 months of the due date for PAYG/GST, by the SGC due date for super | Company lodged late or never lodged |
| Options to remove personal liability | Pay in full, voluntary administration, small business restructuring, or liquidation — within 21 days | Pay in full. Nothing else works. |
| Effect of liquidation | Removes director liability if appointed inside 21 days | Closes the company but leaves you personally liable |
| Super treatment | Available only if the SGC statement was lodged by the SGC due date | The default position for any unreported SGC |
| Wording on the notice | Lists the four remission options | States that administration or liquidation will not remove your liability |
To tell which one you’ve received, read the body of the notice carefully. A 21-day DPN sets out the four remission options. A lockdown DPN explicitly tells you external administration won’t help. If you’re unsure, get the notice in front of an insolvency lawyer or experienced tax accountant the day it arrives — the wording matters.
A common trap: directors assume they’re safe because the company “always lodges its BAS.” But if even one quarter’s BAS was lodged more than three months late, that quarter converts to a lockdown notice. The clock starts from the original due date, not the day you eventually lodged.
What should you do in the 21 days after receiving a DPN?
Twenty-one days sounds like time. It isn’t. The ATO counts from the day the notice is posted to the address registered with ASIC, not the day you open it — so if your ASIC address is out of date, or the letter sat in a mailroom for a week, you have less time than you think.
A practical breakdown:
Days 1–2: Confirm what you’re holding. Check the issue date on the notice. Identify whether it’s lockdown or non-lockdown by reading the remission section. Confirm the dollar amounts against the company’s BAS and SGC statements. Brief an insolvency lawyer or restructuring accountant today — not next week.
Days 3–7: Verify the company’s position. Pull all PAYG, GST and SGC lodgements for the periods listed and confirm the dates. Work out whether the company has the cash to pay in full and where it would come from. Look at the broader picture — is this one notice, or the first of several? If there are co-directors, agree on who is doing what; each of you is liable for the full amount, not a proportional share.
Days 8–14: Choose a path. For a 21-day DPN, the four options are:
- Pay in full — clears both the company and the director liability when funds are available
- Voluntary administration — an administrator takes control; suitable where the business may still be saved
- Small business restructuring — available if total company debts are under $1 million and the business is otherwise viable; allows trading to continue
- Liquidation — winds the company up; appropriate when there is no realistic path to recovery
For a lockdown DPN, the only path that removes personal liability is payment. Liquidation will close the company but the debt follows you home.
Days 15–21: Execute and document. Whichever path you choose, the formal step — payment cleared, administrator appointed, SBR plan filed, liquidator engaged — has to be completed by the 21st day. If you believe you have a defence, prepare the written submission to the Commissioner now rather than waiting for recovery action.
The defences worth knowing about are narrow. You may have one if illness or another acceptable reason kept you out of management for the entire relevant period; if you took all reasonable steps to ensure the company paid or entered an insolvency process; or, for SGC and GST only, if the company applied the relevant law in a way that was reasonably arguable and took reasonable care. Relying on your accountant is not, by itself, a defence. Resignation is not a defence. The defence has to cover the whole period the obligation existed.
If you let 21 days pass without acting, the ATO can offset any tax refunds against the penalty, issue garnishee notices to your bank or employer, sue you in court, and ultimately pursue bankruptcy if the amount justifies it. A DPN doesn’t expire — the ATO can sit on a lapsed lockdown notice for years and act when it suits them, including after the company has been deregistered.
Frequently asked questions
Can I avoid a director penalty notice by resigning?
No. If the unpaid liability relates to a period when you were a director, you remain personally liable after you resign. The ATO can issue the notice months or years later. Resigning isn’t a valid defence and courts have specifically confirmed it doesn’t help. The only way to break the link is to ensure the obligation is met before, or very shortly after, you step down.
Does putting the company into liquidation cancel my personal liability?
Only sometimes. For a 21-day (non-lockdown) DPN, appointing a liquidator inside the 21-day window will remove your personal liability, provided the appointment is genuine and made on time. For a lockdown DPN, liquidation closes the company but leaves you personally exposed for the full amount. The ATO can keep pursuing you long after the company is gone.
Can the ATO take my house or personal assets if I don’t pay?
Not directly, but the path is short. After 21 days the ATO can sue you for the debt. A court judgment lets them garnishee your wages and bank accounts, and ultimately petition for your bankruptcy. Bankruptcy can lead to the forced sale of personal assets, and depending on how the family home is held it may not be fully protected. This is why ignoring a notice is rarely a viable strategy.
I’m joining an existing company as a director. Am I liable for its old tax debts?
You can be. New directors get a 30-day grace period from the date of appointment. Inside those 30 days, you need to ensure the company either pays the outstanding amount, appoints an administrator, appoints a small business restructuring practitioner, or starts winding up. If none of those happens, the company’s pre-existing PAYG, GST and SGC debts attach to you personally. Always run a tax compliance check before accepting a directorship — and get the company’s full ATO portal history in front of you before you sign anything.
