One of the toughest conversations I have with business owners is around Director Penalty Notices (DPNs). Most directors don’t realise that company debt can end up on their own shoulders until a letter from the ATO lands in their inbox.
If you’re a director, it’s worth understanding how DPNs work and, more importantly, what you can do if one arrives.
So, what is a Director Penalty Notice?
In plain terms, a DPN is the ATO’s way of holding directors personally accountable for certain unpaid company debts.
That usually means:
- PAYG withholding (the tax withheld from employee wages)
- Superannuation guarantee (employee super contributions)
- GST (in some cases)
If these amounts aren’t reported and paid on time, the ATO can issue a DPN. Suddenly, what was a company debt becomes a personal liability.
Two types of DPNs you need to know
There are two main types of Director Penalty Notices:
- Non-lockdown DPN
- Issued when debts are reported but not paid.
- You usually have 21 days to take action – pay, enter an arrangement, or appoint an administrator.
- In other words, you’ve still got options.
- Lockdown DPN
- Issued when debts aren’t reported within the required timeframe.
- In this case, the penalty is locked down on you personally as the director.
- Even if the company goes into administration, you’re still on the hook.
Not long ago, I worked with a construction business that had been struggling with cash flow. They fell behind on super and GST, and eventually received a DPN. Because they hadn’t lodged their returns on time, it was a lockdown DPN, which meant the director was personally liable.
It was a tough wake-up call. But once we got clarity on the situation, we put together a plan to restructure the business and protect the director from further risk. It wasn’t easy, but it was possible because they reached out early enough.
What to do if you receive a DPN
- Don’t ignore it, the clock starts ticking as soon as it’s issued.
- Get advice immediately, the options depend on the type of DPN and your company’s position.
- Act within 21 days (for non-lockdown notices), that might mean entering into a payment plan, negotiating with the ATO, or exploring restructuring.
Final thoughts
Receiving a DPN can feel overwhelming, but it doesn’t have to be the end of the road. The biggest mistake is to bury your head in the sand. With the right advice and timely action, you can protect yourself and your business.
I’ve seen too many good people get caught out simply because they didn’t know how DPNs work. My role is to make sure you understand the risks and, just as importantly, the pathways forward.
If you’ve received a notice, or you’re worried you might, let’s talk.
The sooner you take action, the more control you keep.
-Andrew
Book a confidential chat with me here: https://calendly.com/andrew-asadvisory