A Director Penalty Notice (DPN) is a legal mechanism used by the Australian Taxation Office (ATO) to hold company directors personally liable for unpaid Pay As You Go Withholding (PAYG withholding), Superannuation Guarantee Charge (SGC), and Goods and Services Tax (GST liabilities). If you are a company director, understanding DPNs is crucial to protecting yourself from personal liability and potential insolvency.
Types of Director Penalty Notices
The ATO issues two types of Director Penalty Notices (DPNs):
1. Non-Lockdown DPN
A Non-Lockdown DPN is issued when a company director has lodged its Business Activity Statements (BAS) and Superannuation Guarantee Charge (SGC) statements on time but has not paid the outstanding tax debt. Directors have 21 days from the date of the notice to either:
- Pay the company tax debt in full
- Place the company into administration or liquidation
- Enter into a payment arrangement with the ATO
If the company takes one of these actions within the 21-day period, the director may avoid personal liability for tax debts.
2. Lockdown DPN
A Lockdown DPN is issued when a company has failed to lodge BAS or Superannuation Guarantee Charge (SGC) statements within the required timeframes. In this case, the company director liability is automatic, and options such as voluntary administration or liquidation do not remove this ATO debt. The only way to resolve a Lockdown DPN is by paying the tax debt in full.
What Should You Do If You Receive a Director Penalty Notice?
If you receive a Director Penalty Notice (DPN), you must act immediately. Here are the steps to take:
- Verify the details – Check the ATO notice for accuracy and confirm the outstanding business tax debt.
- Seek professional advice – Consulting with an insolvency expert, tax accountant, or business restructuring specialist can help you understand your options.
- Determine the best course of action – Depending on the type of DPN, you may need to pay ATO debt, negotiate a payment plan with the ATO, or explore small business restructuring.
- Respond within the deadline – You have only 21 days to act on a Non-Lockdown DPN. Failing to respond can result in serious personal liability and potential director insolvency.
Preventing Director Penalty Notices
To avoid receiving a Director Penalty Notice from the ATO, directors should adopt proactive measures, including:
- Ensuring timely lodgment and payment of BAS, GST, PAYG withholding, and superannuation liabilities.
- Keeping accurate financial records.
- Regularly reviewing the company’s tax position and ATO liabilities.
- Seeking tax debt help if facing financial difficulties.
How DPNHelp Can Assist You
At DPNHelp.com.au, we specialize in assisting company directors who are dealing with Director Penalty Notices (DPNs). Our team of experts provides tailored solutions, including business restructuring, tax debt negotiation with the ATO, and finding the best strategies to protect your financial future.
If you have received a Director Penalty Notice from the ATO or are concerned about potential director liabilities, contact us today for expert guidance.
Don’t wait until it’s too late—take action now to safeguard your business and personal assets.