What is a Director Penalty Notice (DPN)?

The biggest risk of being a company director in Australia is the Director Penalty Notice (DPN). It pierces the “corporate veil” and allows the Australian Taxation Office (ATO) to come after your personal assets—your house, your car, and your savings—for company tax debts.

1. Two Types of DPNs

A. The “Non-Lockdown” DPN

This is issued when the company has reported its liabilities (SGC, PAYG, or GST) on time but hasn’t paid them.

• The 21-Day Rule: You have 21 days from the date the notice was posted (not received) to take action.
• Escape Route: You can avoid personal liability by:
  1. Paying the debt in full.
  2. Appointing a Voluntary Administrator.
  3. Appointing a Small Business Restructuring practitioner.
  4. Placing the company into Liquidation.

B. The “Lockdown” DPN

This is far more dangerous. It is issued when the company has failed to even report its liabilities within 3 months of the due date (or within 1 month for SGC).

• No Escape: Once a lockdown DPN is issued, the director is automatically personally liable. Even if you put the company into liquidation, the personal liability remains. The only way to remove it is to pay the debt in full.

2. Who is Liable?

• Current Directors: Anyone listed as a director when the debt was incurred.
• New Directors: Even if you just joined the company, you can become personally liable for pre-existing debts if they remain unpaid 30 days after you start.

3. Statutory Defences

There are very few ways to challenge a DPN once the 21 days have passed. Defences include:

• Illness: You were so ill you could not participate in the management of the company.
• Reasonable Steps: You took all reasonable steps to ensure compliance or there were no steps you could have taken.
• Superannuation: You took reasonable care in the circumstances to comply with SGC obligations.

Related Topics

• Winding Up a Company
• Directors’ Duties
• Insolvency Advice

Urgency is Critical

The 21-day timeline for a DPN is strict. If you miss it by even one day, the liability is locked in. If you have received a letter from the ATO or suspect your company is behind on BAS or Super payments, you must act immediately.

Received a DPN? Contact Bell & Senior today. Call (07) 5532 8777.