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What is a director penalty notice?
A DPN turns a company debt into a personal one for each current or recent director. It's a serious step the ATO uses when company tax debts of these specific types remain unpaid, and it's separate from normal company debt collection because it reaches the director's personal assets.
Lockdown vs non-lockdown DPNs: what's the difference?
The difference is timing of lodgement, and it decides whether a director has real options or effectively only one. A non-lockdown DPN applies when the relevant activity statements or SGC statements were lodged on time (even if unpaid); a lockdown DPN applies when they were lodged more than 3 months late or never lodged at all.
| Type | Trigger | Options available | Why lodgement timing matters |
|---|---|---|---|
| Non-lockdown DPN | Debt lodged on time but remains unpaid | Pay in full, appoint an administrator, or begin winding up within 21 days | Lodging on time preserves these options even if the debt can't be paid immediately |
| Lockdown DPN | Lodgement more than 3 months late, or never lodged | Effectively payment in full only - administration and winding up do not remit the penalty | Late or missing lodgements remove the alternative options entirely |
This is the core message worth remembering: lodging on time, even when you can't pay, preserves your options. Directors who lodge but can't pay keep more paths available than directors who simply don't lodge. If BAS lodgement is the part that's slipped, see our BAS due dates guide to get back on schedule.
What can a director do within 21 days?
A director generally has three real options under a non-lockdown DPN, and the clock starts the moment the notice is dated.
Options within 21 days of a non-lockdown DPN
Pay the debt in full
Paying the full penalty amount before the 21 days end remits the personal liability entirely.
Appoint a voluntary administrator
Placing the company into voluntary administration within the period can remit the director penalty, but this decision needs licensed insolvency advice, not a tax agent's guidance alone.
Begin winding up the company
Starting the winding-up process within 21 days is another way to remit the penalty under a non-lockdown notice, again requiring a licensed insolvency practitioner.
Negotiate a payment arrangement where possible
In some cases the ATO may consider a payment arrangement for the underlying company debt, though this does not automatically remove the personal director penalty exposure.
Which debts can a DPN cover?
A DPN can only cover PAYG withholding, GST (since 2020), and the superannuation guarantee charge (SGC), not general company income tax debt. These three categories are treated differently because they involve money the company was meant to be holding on behalf of employees or the ATO, rather than the company's own tax liability.
Can you defend a DPN?
Yes, in limited circumstances there are statutory defences, though they're narrow and fact-specific. These generally include serious illness that prevented the director from taking part in company management, or all reasonable steps having been taken to ensure the company complied, or (for SGC) the company treated the relevant obligations reasonably based on prevailing accounting practice.
A defence needs to be raised properly and with supporting evidence, and directors considering this route should get licensed legal or insolvency advice rather than relying on a general guide like this one.
What about resigned and new directors?
New directors get a 30-day grace period after appointment, meaning they generally aren't personally liable for debts that arose or fell due before that window closes, provided the relevant lodgements happen within it. Resigning as a director does not automatically remove liability for penalties that had already accrued while you were a director.
If you've resigned but received a notice relating to a period you were still a director, this is exactly the kind of situation where licensed insolvency or legal advice is appropriate rather than assuming the resignation clears you.
How do you avoid a DPN in the first place?
The most reliable way is to keep company activity statements and SGC statements lodged on time, even in periods where the company can't pay in full. As the table above shows, on-time lodgement is what keeps a non-lockdown notice (with real options) instead of a lockdown one.
If your company is behind on lodgements right now, our overdue company tax return service can get things current quickly, which is the single biggest factor in whether future DPN exposure stays manageable. If a debt has already built up, our guide on what to do if you can't pay tax debt covers the broader options available to the company itself.
Frequently asked questions
How long do you have to respond to a DPN?
Does a DPN expire?
Can the ATO make me sell my house?
Does putting the company into liquidation always remit the penalty?
General information only - not personal tax, financial or legal advice. Consider your own circumstances or speak to a registered tax agent. Remission of penalties or interest and payment plans are decisions of the ATO and outcomes can't be guaranteed.