When a company enters an ATO payment plan, most directors assume the immediate risk has been dealt with.
An arrangement is in place. Payments are being made. It is reasonable to believe that, while the company meets those payments, the director is protected from further action.
But that is not always how the Director Penalty Notice regime works.
A payment plan can help a company manage its tax debt. It does not automatically remove the debt or guarantee that the ATO will not pursue a director personally.
The Short Answer: Can the ATO Issue a DPN While a Company Is on a Payment Plan?
Answer from Cameron Whinnett, Thryvv.io:
“Technically, yes. The ATO can issue a Director Penalty Notice while a company is on a payment plan. However, the ATO generally does not take firmer action, including issuing a DPN, while the company is complying with an agreed payment plan.”
A compliant payment plan should not be treated as guaranteed protection. If the company misses instalments, falls behind on new tax obligations or lodgements, or defaults on the arrangement, the ATO may take firmer action.
The distinction matters. A payment plan manages how the company repays its tax debt. A DPN deals with the director’s potential personal liability for specific company tax debts.
Why a Payment Plan Does Not Remove Director Risk
An ATO payment plan allows the company to repay its debt over an agreed period. Until it is fully paid, the underlying debt remains outstanding and interest may continue to accrue.
What catches many directors off guard is this: the payment plan belongs to the company, while the DPN regime can create a separate personal liability for the director.
A company may therefore be meeting its agreed instalments and still have director penalty exposure. The position depends on the type of debt, the company’s lodgement history and any recovery action already underway.
For more information, read our guide to managing ATO debt when you cannot pay.
Which Tax Debts Can Lead to a DPN?
The DPN regime does not apply to every debt on a company’s ATO account.
It can apply to unpaid:
- Pay as you go withholding
- Net GST
- Superannuation Guarantee Charge
These are company obligations, but they can also become the director’s personal responsibility when the required payments and reporting obligations are not met.
The timing of the company’s lodgements matters as much as the amount outstanding. This is where the difference between lockdown and non-lockdown DPNs becomes important.
Lockdown and Non-Lockdown DPNs
A non-lockdown DPN generally relates to relevant liabilities reported within the required statutory timeframe.
If a non-lockdown DPN is issued, there may still be ways to remit the penalty within the applicable 21-day period. Depending on the circumstances, these may include paying the debt, appointing a voluntary administrator, appointing a small business restructuring practitioner or beginning to wind up the company.
Entering a payment plan is not one of those options.
A lockdown DPN generally relates to relevant liabilities that were reported late or left unreported. Once a penalty is locked down, appointing an administrator, restructuring practitioner or liquidator will not, by itself, remove the director’s personal liability.
Payment is generally required, subject to any valid defence, dispute or correction.
Read more about lockdown and non-lockdown Director Penalty Notices.
The 21-Day Period Does Not Start When You Open the Letter
The 21 days should not be calculated from the day the notice is opened.
Under the legislation, a notice sent by post is taken to be given when the Commissioner leaves or posts it. Part of the response period may therefore have passed before the director becomes aware of the notice.
Requesting a new payment arrangement does not stop that period. The date and contents of the notice should be reviewed immediately.
What Should You Do If a DPN Arrives?
Do not assume the company’s payment plan has resolved the notice.
Keep the DPN and its envelope. Confirm the periods and amounts included, and determine whether it contains lockdown amounts, non-lockdown amounts or both.
Most importantly, obtain advice promptly. The appropriate response depends on the company’s financial position, lodgement history and the type of penalty involved.
Directors should not rush into administration, restructuring or liquidation without understanding how that decision will affect both the company and their personal position.
If you are concerned that a notice may have gone to an old address, read our guide on how to check whether a Director Penalty Notice may have been issued.
The Company Plan and Your Personal Position Need Separate Attention
An ATO payment plan can be a useful part of a broader recovery strategy. But it should not be treated as proof that the director is personally protected.
This is the gap we regularly see. The company has taken steps to manage the debt, but no one has reviewed what that debt means for the person behind the company.
At Thryvv.io, we act for directors. We help you understand the company’s financial position, identify your personal exposure and coordinate the available pathways alongside your legal, tax and insolvency advisers.
If your company has an ATO payment plan and you are concerned about director exposure—or a DPN has arrived—talk to our Director’s Advocate. Schedule a confidential strategy call on 07 2143 6020.
Disclaimer: This article provides general information only and does not constitute legal, tax, accounting or insolvency advice. DPN outcomes depend on the circumstances, and strict time limits may apply.
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Related support: Director Penalty Notice support · Recover