Director Penalty Notice: what it is, and what to do in the next 21 days

A Director Penalty Notice (DPN) is the ATO's way of reaching past the company and into your personal pocket. It covers the three taxes companies hold on trust: PAYG withholding, GST, and superannuation guarantee.

While those debts sit unpaid, they sit with the company. The moment a DPN is issued, parallel personal liability lands on every director. It's not a warning, and it's not negotiable — it's the legal mechanism, already in motion. What happens next depends almost entirely on what you do in 21 days.

First, work out which DPN you're holding

There are two types, and the difference decides everything:

Non-lockdown DPN. Issued where the company reported its obligations on time (lodged the BAS, the SGC statement) and then didn't pay. With this one you still have options — the penalty can be remitted if, inside the 21 days, the company pays the debt, enters voluntary administration, begins small business restructuring, or is wound up.

Lockdown DPN. Issued where the company didn't report on time — the BAS was never lodged, or the super was never reported. With a lockdown notice, the penalty is locked onto you the moment it's issued. Paying in full is the only way to remit it. No appointment, no restructure, no liquidation shifts it.

Your realistic options inside the 21 days

1. Pay, or negotiate a payment arrangement. If the cash exists — or can be found — clearing the debt ends the matter. A formal ATO payment plan doesn't remit the penalty by itself — it does stop the escalation while you pay it down.
2. Voluntary administration. An administrator takes control and works out whether the business can be sold, restructured through a deed of company arrangement, or wound up. Appointing inside the window remits a non-lockdown DPN.
3. Small business restructuring. For companies under $1 million in liabilities, a lighter formal process where you keep control while a plan goes to creditors. It can remit a non-lockdown DPN — read our honest take on it first, because it isn't the right tool for every company.
4. Liquidation. If the business isn't viable, an orderly wind-up inside the window remits a non-lockdown DPN and draws a line under it — often the cleanest genuine fresh start, and nothing to be ashamed of.

What's not on the list: waiting, ignoring it, arguing with the ATO over the phone, or assuming your accountant is handling it. The 21 days run regardless.

"I'll just resign" — and other ideas that don't work

Resigning doesn't help. You're liable for the debts of the period you were a director, and resignation after the fact doesn't unwind that. New directors get 30 days of grace before inherited liability attaches — after that, the debts of the company become their problem too, including for periods before they joined.

Putting assets in your spouse's name after liability has arisen can be unwound as a voidable transaction, and turns a tax problem into a much uglier legal one. Get advice before moving anything, not after.

And then — the part most advisors skip

Here's the uncomfortable truth from someone who's done this work for years, and been through ATO pressure in his own business: a DPN is a symptom. The company fell behind on the taxes it holds on trust because of how the business was being run — cash flow, pricing, lodgement discipline, decisions that never got made. Remitting the penalty and changing nothing is painting a sinking ship: fresh paint, same captain, same rocks.

Deal with the notice inside the window — properly, with the right appointment if that's what it takes. Then fix the business underneath it, so you're not holding another letter in two years. We help with both halves, and we're honest about which half matters more.