Whilst we may have seen the worst of the COVID-19 pandemic coupled with the slowing of protectional measures, the Australian Taxation Office (ATO) have increased their recovery efforts with respect to outstanding tax liabilities and collecting the debt. The ATO have confirmed that as at 30 June 2021, an outstanding debt of $55 billion was owing by fellow taxpayers. In recovering the outstanding debt, it is anticipated that a wave of Director Penalty Notices (DPN) are to be issued by the ATO.

What is a DPN?

A Director Penalty Notice (DPN) is a formal notice issued by the ATO upon company directors to recover a company’s unpaid Pay As You Go (PAYG) Tax, GST and Superannuation Guarantee Charge (SGC). The DPN regime was introduced to give the ATO the power to make company directors personably liable for certain unpaid company tax debts. DPN’s compel a company directors to comply with the notice, failing which a penalty will be imposed upon directors personally. Therefore, it is important that directors understand the operation of the regime so that steps can be taken to avoid personal liability.

Types of DPN’s

Upon the ATO issuing DPN’s, there are two (2) types of DPN’s of which the ATO may typically seek to impose upon company directors, namely:

  1. Non-lockdown DPN: issued to a company director for PAYG, GST or SGC which is not paid by the due date but where the company has lodged its Business Activity Statement (BAS) and Instalment Activity Statements (IAS) within 3 months of the due date and SGC within one month and 28 days after the relevant quarter.
  1. Lockdown DPN: issued for unpaid PAYG, GST and SGC where a company is late lodging its BAS and IAS, being longer than 3 months after the due date and SGC longer than one month and 28 days after the end of the quarter during which the contribution relates to.

For a director to avoid personal liability, the director will have to undertake one of the following steps within 21 days of receiving the DPN:

  1. Non-lockdown DPN:

3.1 pay the outstanding debt owed;

3.2 appoint a Small Business Restructuring Practitioner (SBRP); or

3.3 arrange for the company to enter into a form of administration (such as voluntary administration, liquidation, or another form of external administration).

  1. Lockdown DPN: the only way for this type of DPN to be remitted or cancelled is by paying the debt in full.


There are limited defences available to company directors in failing to comply with a DPN, namely:

  1. Illness/Incapacity: where a company director was not undertaking an active part in the company during the relevant time;
  1. All reasonable steps: where the company director has complied and taken all reasonable steps to ensure compliance with the DPN; and
  1. SGC: where a company director has adopted the reasonable due care and skill in relation to the SGC payable under the Superannuation Guarantee (Administration) Act 1992.

Key Takeaways

  1. Ensure all lodgements (eg: BAS, IAS, SGC) are submitted within 3 months of their due date, even if payment cannot be effected;
  1. Act quickly and communicate with the ATO early knowing that company directors have 21 days to comply with the DPN prior to the liability becoming personal; and
  1. Work proactively in your role as company director to ensure the company’s reporting is accurate and meets all relevant requirements and deadlines.

Should you require legal advice upon receiving a DPN, the Salerno Law team is available to assist where necessary. Salerno Law frequently advises companies, directors and individuals concerning tax liabilities and negotiations with the ATO.

Authored by: Alexander Phillips and Samuel Shakibaie

DISCLAIMER: This article has been produced for the purposes of general information only and should not be relied upon as legal advice.

Salerno Law’s Corporate Team has extensive experience in providing bespoke advice to corporate clients of varying maturity levels for a wide range of industries. We take the time to get to know the people behind the company as well as their history and objectives to ensure that practical outcomes are achieved through the provision of personal and specialised advice. Further, with the firm’s partners having individually owned and operated successful corporate projects both in Australia and internationally, our bespoke advice is delivered in a pragmatic and cost-conscious manner.

Article by Alexander Phillips and Samuel Shakibaie