Speak to an expert Today

Contact
(02) 5760 8581

Received a Director Penalty Notice? What To Do in the Next 21 Days

If a Director Penalty Notice just landed on your desk — or in your inbox — the clock is already running. This guide walks you through what a DPN actually is, the four ways out, and the decisions you need to make before day 21.

What a DPN actually is (in plain English)

A Director Penalty Notice (DPN) is how the Australian Taxation Office steps around your company and comes after you personally for unpaid tax debt.

Normally, if a Pty Ltd company can’t pay its tax bill, the company is on the hook — not the director. A DPN changes that. Once it’s issued, the ATO can pursue your personal assets — your house, your car, your savings, your future income — to recover the company’s unpaid PAYG withholding, GST, or superannuation guarantee charge (SGC).

That’s it. That’s the mechanism.

The important bit: you have 21 days from the date on the notice to act. Not the date you opened the envelope. Not the date your accountant forwarded the email. The date printed on the notice itself.

The two types of DPN — and why it matters

There are two flavours of DPN, and which one you’ve received changes what you can do about it.

1. Standard (or “non-lockdown”) DPN

Issued when your BAS and SGC statements were lodged on time but the tax wasn’t paid.

You have four ways out (covered below). Three of them don’t involve paying the debt in full.

2. Lockdown DPN

Issued when your BAS was lodged more than 3 months late — or your SGC statement more than 1 month after the quarterly due date.

Only one way out: pay it. The escape hatches that let you appoint an administrator or SBR practitioner are already closed. This is why late lodgment is the single biggest own goal a director can score.

The honest bit: if your BAS is currently 3+ months overdue and you haven’t received a DPN yet, you are living on borrowed time. Every day the ATO doesn’t issue one is a day you could still lodge and preserve your options. Once the DPN drops, lodging late doesn’t help — the lockdown status is set at the moment of issue.

The four ways out of a DPN

For a standard (non-lockdown) DPN, the Corporations Act and Division 269 of the Taxation Administration Act give you exactly four exits. All four must be completed inside the 21-day window.

Option 1 — Pay the debt in full

Straightforward, if you have the cash. This wipes personal liability entirely.

Option 2 — Appoint an administrator (voluntary administration)

Under Part 5.3A of the Corporations Act. An external administrator takes control of the company while a plan is worked out. Personal liability is lifted, but the company loses independence and the process is public.

Option 3 — Appoint a Small Business Restructuring (SBR) Practitioner

Under Part 5.3B, available to companies with under $1 million in liabilities. You keep running the business while a registered practitioner oversees a plan to settle debts — typically at 20–30 cents in the dollar. Personal liability is lifted the moment the practitioner is appointed. This is often the strongest option for small companies.

Option 4 — Begin winding up (liquidation)

Appointing a liquidator also lifts the personal penalty. But it ends the company. Only chosen when the business genuinely isn’t worth saving.

Missing the 21 days doesn’t just cost you these options. It locks the personal debt in permanently. After day 21, the ATO can:

  • Garnishee your wages or bank accounts
  • Issue a statutory demand against you personally
  • Bankrupt you
  • Register a charge over your property
What you should do in the next 24 hours
  1. Find the notice and check the issue date. Not the received date. Count 21 days forward. That is your deadline.
  2. Do not lodge anything late in a panic. If your BAS is already overdue, urgent lodgment can sometimes worsen your position depending on timing. Get advice first.
  3. Do not transfer assets out of the company or to family members. Section 588FDB of the Corporations Act allows liquidators to claw back “creditor-defeating dispositions” — and doing so can attract personal liability of its own.
  4. Speak to a pre-insolvency advisor — someone who does not take insolvency appointments, so their advice isn’t shaped by which outcome pays them.
Can I ignore a DPN if I’m resigning as director?

No. Resignation does not extinguish DPN liability for tax periods when you were a director. New directors also inherit exposure to debts arising during their term. Resigning to escape a DPN is not a strategy — it’s often evidence of insolvent trading.

Sometimes — but not always, and not automatically. Personal tax liability arising from a DPN can survive certain insolvency events. Never assume it does. This is one of the most misunderstood areas of Australian insolvency law.

DPNs are validly served when posted to the address held by ASIC — regardless of whether you opened them. Keep your ASIC director address current. If you moved and didn’t update ASIC, the 21 days ran anyway.

An existing ATO payment arrangement does not stop a DPN from being issued or enforced. The ATO can issue a DPN even while a payment plan is in place. Payment plans and DPN response are separate processes.

At Langford & Chase, a DPN response engagement typically runs $3,000–$15,000 depending on complexity — a fraction of the personal liability being triggered. We’re strategic advisors, not liquidators, so our fee doesn’t shift based on which of the four options you take.

Move fast and you have options. Move slow and they disappear.

Time is the entire game with a DPN. Every day past the notice date narrows the exit list.

If you’ve received a DPN — or you suspect one is on its way — book a free 30-minute strategy call. We’ll walk you through which of the four options is actually open to you, and get the right registered practitioner engaged if you need one.

Looking for assistance?

Schedule a consultation with our team.