Directors Penalty Notice
When Company Debt Becomes
Your Problem
✔ 24/7 support hotline for DPN worries.
✔ 21-Day and Lockdown DPN advice.
✔ Avoid personal liability.
✔ Protect your assets.
✔ Rapid, short-notice support.
Received a Directors Penalty Notice From the ATO? You're Not Alone
You’re running your business to provide a valuable service or product, employ people, support your family, and build a future for yourself. But, when times become tough, it means you need to make hard decisions … often prioritising salaries, rent, and supplier payments just to stay afloat.
And that can mean your tax obligations fall behind.
Often, it results in nothing more than a formal letter from the Australian Tax Office (ATO). However, when things become more serious, or you’ve ignored previous correspondence, you could receive a Directors Penalty Notice (DPN).
It’s discomforting, causes you stress, and feels really unfair. But most seriously, it could place your savings, home, and assets at risk.
At Ash Walker Lawyers, we understand your fear and feelings of apparent injustice. We know that behind every single DPN, there’s a person who’s been committed to trying to keep their business going. Ash Walker brings calm to your chaos, providing guidance, action, and solutions to defend you, your interests, and your business.
What Is a Director Penalty Notice?
In Australia, many people choose the Proprietary Limited Company (Pty Ltd) structure to protect themselves and their assets from the risks of running a business … known as the corporate veil. But, it’s not an impenetrable shield, particularly when it comes to the ATO.
The Director Penalty Notice is one of the most powerful and unsettling tools the tax office has. It’s a formal letter, delivered to the company director(s), that says if the tax obligation isn’t addressed quickly, they will make the directors personally liable for the outstanding monies.
And, the ATO isn’t shy about using this debt collection tactic.
Research shows that between 2022 and 2024, the tax office presented over 30 thousand directors with DPNs … that’s a lot of concerned and stressed company officers. Ash Walker Lawyers is your ally, giving urgent, strategic advice to protect your assets and work towards a brighter future.
Why Did I Receive a Director Penalty Notice?
Usually, the ATO typically issues a Director Penalty Notice when a company isn’t meeting its tax obligations, and you, as the director, then also fail to take timely action.
That said, the tax office can’t use a DPN in all tax liability circumstances. They can only be issued for three specific types of tax debt that you, as a director, are personally responsible for ensuring the company reports and pays:
The Three Tax Debts Applicable to DPNs
- Pay-As-You-Go (PAYG).
- Superannuation Guarantee Charge (SGC).
- Goods and Services Tax (GST).
But, just owing money to the ATO for these three tax areas doesn’t automatically mean you will receive a DPN. The ATO will usually only act if certain conditions are met:
The Common Triggers for a DPN
- Your company hasn’t paid its PAYG, Superannuation, or GST.
- You didn’t report these obligations to the ATO by the due date.
- The ATO has tried other collection methods, and failed.
- Your company recently went into liquidation.
- You’re newly appointed as a director, and didn’t act within 30 days to address outstanding ATO debts.
- Your business has an unfortunate history of tax non-compliance.
- Your operation is trading while insolvent.
- Your enterprise repeatedly fails to stick to payment arrangements.
- ‘Phoenix Activity’ – your company avoids tax by liquidating, then setting up under a new name.
- You, or another director, actively avoids speaking to the ATO.
Received a DPN?
The Two Types of DPN … And Why They Are Important
The ATO can issue you with one of two types of DPN … Standard or Lockdown.
Knowing which one you have received is vital, as it dramatically affects your legal implications, actions you have available, and timeframe requirements.
DPN 1 – The Standard Director Penalty Notice
This is also known as a Non-Lockdown DPN or 21-Day DPN.
In most circumstances, you receive this if the company has delivered its returns and activity statement promptly … but simply has not paid the required tax. You have 21 days from the date of the Director Penalty Notice to act, which usually means either paying the debt, or putting your business into liquidation or administration.
Burying your head in the sand will not make the problem go away. If you don’t act by the deadline, you become personally liable. It’s not a time for panic, but a time for positive action. Ash Walker Lawyers can offer you powerful advice on dealing with a 21-Day DPN.
DPN 2 – The Lockdown Director Penalty Notice
If your company hasn’t lodged its tax returns or activity statements on time, and the tax remains unpaid, you could receive a Lockdown DPN.
Your personal liability is automatic … there’s no way to avoid it, apart from paying the debt. That means putting the company into administration or liquidation will not take away your obligations, unlike with a 21-Day DPN.
Bear in mind, the ATO can issue you with both a 21-Day and Lockdown DPN at the same time, where different debts/amounts apply to the different DPNs and need addressing separately.
Act Immediately!
What You Should Do if You Receive a DPN
In short, seek legal advice immediately from an ATO tax debt expert, such as Ash Walker Lawyers.
We know that getting a DPN is distressing, and may make you feel defeated or embarrassed, but the worst thing you can do is ignore it. The ATO is relentless and will not simply forgive or forget.
Failure to act in the 21-Day DPN timeframe can lead to:
- Personal liability – as the DPN ‘locksdown’ and the obligation for the tax falls on you and your assets.
- Loss of options – once the 21 days have passed, your ability to avoid personal liability by getting a liquidator or administrator has gone.
- ATO legal action – once you’re personally liable, the ATO may start debt recovery, including:
- Garnishee Notices – instructing banks or employers to withhold your money.
- Court judgments – ATO filing claims against you in court.
- Freezing orders – preventing you from selling, moving, or transferring your personal assets.
- Bankruptcy proceedings – leading to you being declared bankrupt.
The long-term after effects of a DPN can last for years, affecting your creditworthiness, property rental opportunities, and ability to run another business. If you get a DPN, call Ash Walker immediately for understanding expert advice, proactive guidance, and decisive action to protect your future.
Act NOW! Reach Out to Ash Walker Lawyers
The Director Penalty Notice Defence Options
It’s possible to lodge a defence with the ATO against a Director Penalty Notice, but your options are quite limited.
For example, proving that you were seriously ill and were unable to meet your tax obligations during your illness could be acceptable. However, blaming accountants and professional advisors, saying you were innocently ignorant of tax requirements, or just didn’t have the money at the time, aren’t going to succeed.
The three statutory defence strategies permitted in section 269-35 of the Taxation Administration Act 1953 include:
Illness
You, as the director, didn’t participate in (and it would be really unreasonable to expect you to participate in) the management of the company during the time that the liabilities arose because of sickness.
All Reasonable Steps
Despite failing to meet your obligations, you took all reasonable steps to ensure that your company:
- Paid its debts.
- Appointed an administrator.
- Appointed a qualified small business restructuring practitioner, or
- Started the winding-up process.
Reasonably Arguable Position
This defence is available for any unpaid Superannuation Guarantee Charge (SGC) and Goods and Services Tax (GST) obligations.
You need to show that your company’s position on the tax regulations was reasonably arguable. That means that the way you interpreted it, based on the relevant legislation, was about as likely to be correct as it was incorrect. This is a seriously technical defence that requires expert legal and tax advice to prove.
An Additional Note on DPN Defences
In addition to these statutory defences, an experienced DPN lawyer … such as Ash Walker … will also check that the notice itself isn’t in error. For example, if the DPN was issued unlawfully or incorrectly, such as having the wrong address, amounts, or if the ATO failed to follow the correct process.
How Ash Walker Lawyers Helps You With Your DPN
At Ash Walker Lawyers, we don’t give you off-the-shelf DPN advice. Instead, we take time to understand your particular circumstances, your liabilities, and your fears … working ceaselessly to find the most powerful and productive tax solutions while bringing you calmness and reassurance.
Whether you’re trying to remit the penalty, restructure your operation, or even challenge the notice itself … it’s our mission to protect you, your assets, and find a positive way forward.
We can advise, assist, and explain outcomes on:
- Paying the debt – the simplest way to resolve a DPN. If your company lacks funds, we can discuss potential financing or refinancing options.
- Director penalty notice payment plan – for standard DPNs, we can help negotiate manageable instalment payments with the ATO.
- Administrator appointments – if your company is viable, a voluntary administrator could remove a non-lockdown DPN.
- Deed of Company Arrangement (DOCA) – if an administrator is appointed, proposing a DOCA to creditors for payment.
- Small Business Restructure (SBR) – an alternative to administration, permitting eligible small businesses to restructure their debts while still trading.
- Appointing a liquidator – for standard DPNs, placing the company into liquidation to wind up the company and remit the DPN.
- Challenging DPN validity – in specific circumstances, checking the DPN for errors, calculation mistakes, or procedural infringements made by the ATO, allowing it to be set aside.
Get Tailored DPN Advice
Don’t Let a Director Penalty Notice Define Your Future
Having a Director Penalty Notice drop through your letterbox can be one of the most concerning events you, as a company director, can face. The worry of personal liability, the threat to your home and savings, and the fear of legal action can be overwhelming.
But remember, the worst thing you can do is delay, ignore, or bury your head in the sand. The best thing you can do is talk to Ash Walker Lawyers.
When you have us on your side, you have a knowledgeable, calm, and relentless legal professional to defend your interests. Acting as your shield, advisor, and legal practitioner, we deliver unmatched guidance to defend you against the might of the ATO.
With Ash Walker Lawyers, You Gain the Benefits Of:
24-Hour FREE Hotline
DPN worries can hit you hard at any time of the day or night, so receive guidance when you need it most.
Urgent Response
Giving you clear, fast guidance and action within the crucial 21-day timeframe.
Compassionate and Non-Judgemental Help
Offering a safe space to discuss your worries … with support, not judgement.
Expert Defence
Carefully examining your case to identify statutory defences and DPN procedural errors.
Powerful Negotiation
Backed by years of experience successfully negotiating with the ATO.
Short-Notice Help
Even when the DPN deadline is close, we can still help.
Transforming Chaos Into Clarity
Bringing reassurance and structure to stressful DPN situations.
Focused Personal Liability Protection
Concentrating on defending your personal assets, home, and savings.
Received a Directors Penalty Notice? Act NOW!
Directors' Penalty Notices FAQs
Can I Get a Director Penalty Notice After Liquidation?
Yes! A Director Penalty Notice (DPN) can still be issued after a company has been put into liquidation … especially when the ATO thinks that certain tax liabilities weren’t reported on time.
This is a Lockdown DPN, which cannot be removed by appointing a liquidator or administrator.
Are Fines and Penalties Tax Deductible?
Usually, no. The ATO doesn’t allow deductions for tax penalties or fines.
That said, some interest charges on overdue tax debts … such as the General Interest Charge (GIC) … could be deductible in certain business circumstances.
Can More Than One Director Get a DPN?
Yes, they can! The ATO can give separate DPNs to each director of a company. Every notice is personal, therefore making each individual liable for the relevant tax debt.
How Does the ATO Give the Notice to the Director?
The ATO posts the DPN to the director’s home address. They find this from the ASIC records, so it’s important your information is up to date.