A Director Penalty Notice (DPN) signals potential personal recovery of specified unpaid company liabilities. Time matters, but the correct response depends on the notice, the company's reporting history and the director's circumstances. Obtain urgent tax and, where appropriate, legal or insolvency advice while the facts are checked.
Record the notice and the date it was given
Keep every page of the DPN and its envelope or electronic delivery record. Record when it was given, not simply when someone in the company first read it. The ATO generally cannot commence recovery proceedings for the director penalty until 21 days after giving a DPN. That period is short; do not use it as a reason to delay advice or assume all response options remain open for the full 21 days.
Check the named directors, company, liability types, amounts and periods. Compare them with company account statements and lodgments. An error or payment may affect the amount, but an informal disagreement with the ATO does not by itself resolve the notice.
Identify the liabilities and reporting history
Director penalties can relate to unpaid PAYG withholding, net GST and super guarantee charge (SGC) liabilities. Reconcile each amount separately. For super, check whether SGC statements were lodged when required; ordinary super contribution records alone may not explain the SGC position.
The timing of company reporting is critical. A lock-down penalty arises where relevant liabilities were not reported within the statutory period. In that situation, steps such as placing the company into administration or beginning a qualifying restructuring or winding-up generally do not remit the penalty. Where reporting was timely, different remission options may exist, subject to strict rules and timing. The notice and full lodgment history need individual review.
Do not assume a simple step removes personal exposure
A company payment arrangement may help manage the underlying debt, but it does not itself erase a director penalty. Resigning as a director does not automatically remove liability for earlier periods. Likewise, insolvency action must be assessed against the reporting history and the applicable law; it is not a universal solution.
Check director appointment and resignation dates, periods for which the company had liabilities, the date each amount was reported, payments made and any earlier notices. Limited statutory defences may be relevant, but they depend on evidence and should be assessed with professional advice.
What to do first
- Preserve the complete notice and evidence of when it was given.
- Reconcile each PAYG, net GST and SGC amount against statements and lodgments.
- Map reporting dates and check whether any penalty is locked down.
- Gather director appointment records and relevant company correspondence.
- Seek urgent tax advice, with legal or insolvency advice where the company's solvency or recovery action is in issue.
Do not wait until the end of the 21 days to establish the facts. The available steps and their effects depend on the particular notice and reporting history.
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Frequently asked questions
What does the 21-day period mean for a DPN?
The ATO generally cannot begin recovery proceedings for the director penalty until 21 days after giving the notice. The correct response should be assessed immediately because available options depend on the circumstances.
What is a lock-down director penalty?
It is a penalty for which certain restructuring or insolvency steps do not provide remission because relevant company liabilities were reported outside the statutory period. The reporting dates must be checked.
Will a company payment plan cancel the DPN?
No. A company payment arrangement does not by itself remove a director penalty. Payments and the statutory remission rules need separate analysis.
Does resigning as director remove the penalty?
Not automatically. Liability can relate to periods before resignation, and appointment dates, reporting history and any statutory defence need review.