What to do if I receive a Director Penalty Notice (DPN)
Receiving a Director Penalty Notice (DPN) means the Australian Taxation Office (ATO) has made a Director personally liable for the company debt.
Directors will receive a separate DPN letter for outstanding GST, PAYG Withholding and Superannuation Guarantee Charge (SGC), however they will normally be issued at the same time. Within these letters, the DPN amount will either be “Lockdown”, or “Non-lockdown”, or a combination of both.
Lockdown Director Penalty Notice
These are issued where the Company's tax compliance history is poor, with lodgements for Business Activity Statements (BAS) and SGC forms not made on time and remaining overdue for an extended period. These periods are as follows:
- Superannuation Guarantee Charge - the unpaid amount of the SGC obligation is reported after the due date.
- PAYG and GST - within three months of the due date for lodgement for BAS and Instalment Activity Statements (IAS).
In the case of a Lockdown Director Penalty Notice, there is very little a director can do. They are made personally liable for the debt, and the only option is to repay the amount in full. This amount will not be remitted, regardless if you take steps towards insolvency, such as appointing a small business restructuring practitioner or beginning a liquidation. You will remain personally liable for this debt and will need to deal with it in some manner.
Even if a lockdown DPN has not been received, the ATO can retrospectively issue these notices at any time.
Non-Lockdown Director Penalty Notice
This type of DPN provides the directors with options for dealing with the debts within a 21-day period from the date of the notices to have the penalties remitted. There are 4 options:
- Paying the debt in full.
- Appointing an administrator for a voluntary administration under section 436A, 436B or 436C of the Corporations Act 2001.
- Appointing a small business restructuring practitioner under section 453B of that Act.
- The company begins to be wound up (a process also known as liquidation, within the meaning of the Corporations Act 2001).
What Happens when I Receive a DPN
DPNs are issued to the residential address of the directors per the Australian Securities and Investments Commission (ASIC) company record. They are not issued to your Accountant or Tax Agent.
We encourage you to check that this record is correct in ASIC's records and immediately updated if it is inaccurate.
When issued, a Director Penalty Notice Account is created under the director’s personal ATO record. We encourage you to check this twice a week as it provides early warning of an impending DPN being issued. You can see this account by navigating to Tax > Accounts > Summary in the director’s personal ATO portal (my.gov.au).
If you act on a non-lockdown DPN prior to the date provided on the letter, then the non-lockdown amounts will be remitted from the director's personal ATO portal once the action has been processed by the ATO.
Next Steps and The Risks of Delay
If you can't pay your debt in full and you receive a DPN, then you will need to move quickly to avoid further personal liability for tax arrears. For non-lockdown amounts, failing to act within the timeframe provided in the letter will mean that the amount will become a lockdown penalty.
The best thing to do is immediately reach out to an insolvency practitioner or someone who is experienced in dealing with businesses in financial distress, like Thryvv.io.
Act Quickly
Don't let DPN notices expire; failing to act could be the difference between keeping and losing your house and may put your personal assets at risk or damage your credit rating.
We will look at the specific circumstances and create a strategy to move forward.
Contact us immediately if you receive a Director Penalty Notice (DPN) >
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A Director's Advocate is someone who acts as a support system, advisor, or intermediary for directors in a business or organisation, assisting them to manage complex business problems.
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