Director penalty notices: what they are and what to do in your 21 days

A director penalty notice (DPN) is a letter from the Australian Taxation Office (ATO) saying you are personally liable for some of your company’s unpaid tax. It covers unpaid pay as you go (PAYG) withholding, goods and services tax (GST) and the superannuation guarantee charge (SGC). The ATO can start recovering the penalty 21 days after it gives you notice.

What you can do in those 21 days depends on whether the company reported those amounts to the ATO on time. If it did, you generally have four ways to have the penalty remitted. If it didn’t, the penalty is locked down, and only payment in full will remit it.

Responding promptly matters, but there is no need to panic. Start with the date the notice was posted and the company’s lodgement history. Those two facts determine what you can still do.

What a director penalty notice means for you

A DPN does not create a new debt. The law makes each director liable for a penalty equal to the company’s unpaid PAYG withholding, GST and SGC. The ATO describes this as a parallel liability: your liability mirrors the company’s, and a payment by either reduces both. The regime sits in Division 269 of Schedule 1 to the Taxation Administration Act 1953.

The notice is what allows the ATO to recover that penalty from you personally once the 21 days have passed. If the penalty is not remitted, the ATO can:

• offset your personal tax refunds and credits against the penalty
• issue garnishee notices to your bank, your employer or people who owe you money
• take legal action to recover the debt from you

A DPN does not cover company income tax, or debts the company owes to suppliers, banks or other creditors. Personal guarantees you have signed are a separate exposure, and it is worth looking at both together.

How the 21 days are counted

The ATO posts the notice to your address on the Australian Securities and Investments Commission (ASIC) register, or leaves it there. The 21 days start on that day. They do not start when the notice reaches you or when you open it, so any postal delay comes out of your 21 days.

A notice sent to an out-of-date ASIC address still counts. If you think a DPN may be on its way, check that your ASIC details are current. If one has arrived, work out the end of your 21 days before anything else. Your accountant may also receive a copy, but the ATO doesn’t have to send one, and a copy doesn’t change when the 21 days start.

Which kind of DPN have you received?

Non-lockdown DPN. The company reported the amounts on time but has not paid them. For PAYG withholding and GST, that means within three months after the due date. A non-lockdown penalty can still be remitted within 21 days, using one of the four options below.

Lockdown DPN. The company did not report the amounts in time. For PAYG withholding and GST, that is three months after the due date. For SGC, it means the SGC statement was not lodged by its due date for quarters up to 30 June 2026. For Payday Super periods from 1 July 2026, the ATO assesses SGC, and an amount is locked down unless the company lodged a voluntary disclosure statement on or before the director penalty due date. You can only remit a locked-down penalty by paying it in full. Appointing an administrator, a small business restructuring practitioner or a liquidator will not remove it.

Some amounts can be locked down and others not, depending on when each period was reported. Your accountant can usually confirm this from the company’s lodgement history. Our guide to lockdown vs non-lockdown DPNs sets out the difference in more detail.

Your options within the 21 days

For a non-lockdown DPN, the penalty is remitted if one of these four things happens within the 21 days. Each has a cost, and each suits a different situation.

1. Pay the debt in full. Paying the company’s tax debt covered by the notice remits the penalty. A part payment reduces the debt but does not remit the rest.
2. Appoint a small business restructuring practitioner. Small business restructuring lets an eligible company put a plan to its creditors while you stay in control of the business. Eligibility tests apply, including a $1 million limit on the company’s debts, and creditors, often including the ATO, vote on the plan.
3. Appoint a voluntary administrator. In voluntary administration, an independent administrator takes control of the company and creditors decide its future. That can be a deal with creditors that lets the business continue, or liquidation.
4. The company begins to be wound up. Liquidation ends the company and generally means the business stops trading. It suits a company that cannot be saved.

The appointment itself has to be made within the 21 days, not just discussed. Only a Registered Liquidator can be appointed as an administrator, a small business restructuring practitioner or a liquidator.

The right option depends on whether the business is viable, the size of its debts, and what you have personally guaranteed. If a business can be saved, we’ll say so, and if it can’t, we’ll say that too.

What does not stop a director penalty?

1. A payment plan. Entering an ATO payment arrangement does not remit the penalty, and you remain personally liable while it is in place. While a plan covering the debt is in force, the ATO cannot start proceedings to recover the penalty, but it can still issue a DPN, and that protection ends if the plan is defaulted on.
2. Resigning. A director who resigns can remain liable for amounts that fell due before they resigned, and for some that fall due afterwards but relate to a period when they were still a director.
3. Liquidation after the deadline. Placing the company into liquidation after the 21 days, or at any time for locked-down amounts, does not remit the penalty. Your liability also continues after the company is deregistered.
4. Ignoring the notice. Once the 21 days pass, the ATO can start recovery against you, and options available on day one may no longer be.
5. Moving assets. Transferring your house or savings to a family member to keep them out of reach can be challenged and unwound, and can make your position worse.
6. Unregistered advisers. Some pre-insolvency advisers are not registered and cannot take any of the appointments above. Check that the person advising you is a Registered Liquidator before you pay for advice.

Other directors, new directors and defences

More than one director. The ATO can issue a DPN to each director, and each is likely to owe the same amount. It can recover the penalty from any or all of them.

New directors. A new director is not liable for a director penalty that was due before their appointment if, within 30 days of the appointment, the company pays the amount in full, appoints an administrator or small business restructuring practitioner, or begins to be wound up.

Defences. A defence may be available in limited circumstances: where, because of illness or another good reason, it would have been unreasonable to expect you to take part in managing the company, and you did not; where you took all reasonable steps to have the company pay, appoint an administrator or small business restructuring practitioner, or begin to be wound up, or there were no reasonable steps you could have taken; or, for SGC and GST, where the company treated the law as applying in a way that was reasonably arguable and took reasonable care. Defences are narrow and depend on evidence from the time. Relying on others, including professional advisers, is not a defence in itself. If the ATO starts recovery outside court, you generally have 60 days from its notice to provide supporting information, so assess any defence early.

How Rapsey Griffiths can help

If a director penalty notice has arrived, or you think one is on its way, Rapsey Griffiths can give you a confidential view of where you stand: which kind of notice it is, when your 21 days end and which options are realistic for the business and for you. You’ll deal directly with Mitch Griffiths or Chad Rapsey, Registered Liquidators, Trustees and Chartered Accountants, and we can work alongside your accountant. Contact our team today.

Last updated 11 November 2026. This is general information, not advice for your situation.