Quick answer
A director penalty notice (DPN) is how the ATO makes directors answer personally for three kinds of company tax debt: amounts withheld from wages, GST and the super guarantee charge. Collection from the director can begin three weeks after the notice date. Within that window, directors may be able to remit it by paying the debt, appointing an administrator or restructuring practitioner, or winding up, but only if the amounts were reported on time.
Key points
- Three company debts are in scope: withheld wages tax, GST and the super guarantee charge.
- Recovery from the director can start three weeks after the notice date.
- Late reporting limits the ways a penalty can be remitted.
- Get professional advice immediately if you receive a DPN.
Checklist
- Date of DPN issue noted
- Amounts and periods covered identified
- Reporting dates checked
- Accountant or insolvency adviser contacted
- Options, including finance, assessed within the window
Most company directors know that a company is a separate legal entity, which is part of why they operate through one. The director penalty regime is a major exception. It allows the ATO to make directors personally liable for certain company tax debts, and a director penalty notice (DPN) is the document that starts that process. If you are a director, understanding it before you ever receive one is important.
What a DPN covers
According to the ATO, directors may become personally liable for a company’s unpaid:
- PAYG withholding (tax withheld from employees’ wages);
- net GST;
- super guarantee charge.
The ATO can also issue DPNs based on its own estimates of unpaid amounts. The ATO’s director penalties page sets out the rules.
The 21-day window
The ATO can recover the penalty from you 21 days after the DPN is issued. Within that period, you may be able to have the penalty remitted if the company:
- pays the outstanding amount in full;
- appoints an administrator or a small business restructuring practitioner; or
- begins to be wound up.
You can also lodge a written defence with the Commissioner if one applies.
The reporting rule that changes everything
Whether those remission options are available depends on when the liabilities were reported. Under the ATO’s rules, if withheld wages tax or GST stayed unlodged for over three months past the due date, the only way to clear the penalty is to pay what the company owes in full. Super guarantee charge reported after its due date, or never reported, follows the same rule.
| Situation | Ways to remit the penalty |
|---|---|
| Reported on time (within the rule) | Pay in full, administration, restructuring or winding up |
| Reported late or not reported | Pay the company liability in full |
This is why lodging on time, even when you cannot pay, is so important for directors.
What to do if you receive a DPN
- Note the issue date and calculate the 21-day deadline immediately.
- Identify which amounts and periods the notice covers.
- Check when each was reported.
- Contact your accountant and, where appropriate, an insolvency or restructuring adviser.
- Assess your options, including whether finance could pay the liability in full.
Do not wait for the deadline to approach. Options narrow as time passes.
Where finance fits
If the company is viable and the issue is a cash shortfall, a loan to pay the covered liabilities in full can remit the penalty. That may involve property security, because time is short and amounts can be significant. Our ATO tax debt loans review explains how lenders assess these situations, and our guide to ATO payment plans versus loans helps weigh alternatives. Finance is not right in every case; if the business cannot trade its way forward, restructuring or other options may be more appropriate.
Preventing DPNs
- Lodge BAS and super guarantee statements on time, every time.
- Set aside PAYG withholding and GST in a separate account as you collect them.
- Pay super on time; under Payday Super from 1 July 2026, contributions must reach funds within seven business days of payday, with some exceptions.
- Monitor the company’s ATO account regularly.
- Act early if a shortfall appears. Our guide to BAS and GST cash planning explains practical steps.
New and former directors
New directors can become liable for amounts that were unpaid when they joined, after a short period, and former directors can remain liable for periods when they held office. Anyone joining a board should check the company’s tax position first.
An illustrative example
A made-up engineering company with on-time lodgements falls behind on PAYG and GST after a major customer enters administration. A DPN is issued. Because the amounts were reported on time, the directors have options. With their accountant, they confirm the business is viable, arrange a short-term property-secured loan within the window, pay the liabilities in full and remit the penalties.
Keeping your own records as a director
Directors are expected to stay informed about the company’s tax position. Ask for a regular summary of lodgements and payments from whoever manages the books, check the ATO account yourself periodically and keep copies of activity statements. If you rely on a bookkeeper or co-director, confirm lodgements actually happened. Not knowing is rarely a defence, and records showing you took reasonable steps can matter if a dispute ever arises.
Facing a DPN or worried about one?
If you are a director dealing with ATO debt, time matters. Make one enquiry to explore finance options alongside professional advice. There is no credit check when you first enquire, a real person reviews it and your details go to one lending partner rather than a crowd. Include the DPN issue date in your enquiry so the timing can be considered immediately.
Frequently asked questions
Who can receive a director penalty notice?
Current directors and, in some cases, former directors for periods when they were directors. New directors may also become liable for existing unpaid amounts after a period of joining.
What does the 21-day period mean?
The ATO can begin recovering the penalty from you 21 days after the DPN is issued. Acting within that window keeps more options open.
What is the three-month reporting rule?
Where withheld wages tax or GST was lodged over three months late, or never lodged, the director can generally only clear the penalty by having the full company debt paid. For super guarantee charge, the timing is tied to the SGC due date.
Can a business loan help with a DPN?
Finance used to pay the underlying company liability in full can remit the penalty. Speed matters, and the decision should be made with professional advice.
Can I defend a DPN?
There are limited statutory defences, such as illness preventing involvement in management or having taken all reasonable steps. Seek legal advice.
Do DPNs affect my personal credit?
If the ATO pursues you personally and you do not pay, recovery action could follow, which may affect your credit and assets. Act promptly.
How can I avoid DPNs in future?
Lodge BAS and super statements on time even if you cannot pay, set aside PAYG and GST as collected, and keep super payments current under Payday Super.
Does resigning as a director stop a DPN?
Resigning does not automatically end liability for amounts that arose while you were a director. Get advice before resigning in response to tax debts.
Sources and further reading
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