--- title: "Director Penalty Notices (DPNs) Explained | Astris Law" description: "A director penalty notice makes you personally liable for company tax debts. The 21-day rule, lockdown DPNs and how to respond, from a Brisbane lawyer." lang: en-AU json-ld: | [ { "@context": "https://schema.org", "@type": [ "LegalService", "LocalBusiness" ], "@id": "https://www.astrislaw.com/#organization", "name": "Astris Law", "legalName": "Astris Law Pty Ltd", "alternateName": [ "Astrons General Counsel", "Phronesis Litigation", "HeadStart Counsel" ], "url": "https://www.astrislaw.com", "logo": { "@type": "ImageObject", "url": "https://www.astrislaw.com/android-chrome-512x512.png", "width": 512, "height": 512 }, "image": "https://www.astrislaw.com/android-chrome-512x512.png", "description": "The Astris Law group gives directors and business owners the right legal capability for whatever their business needs, across corporate, disputes and regulatory. 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A DPN makes you personally liable for the company's unpaid PAYG withholding, GST and superannuation guarantee charge. The 21 days runs from the date the ATO posts the notice, not the date you receive it and if the company lodged late the liability may already be locked down with no way to remit it. 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A DPN makes you personally liable for the company's unpaid PAYG withholding, GST and superannuation guarantee charge. The 21 days runs from the date the ATO posts the notice, not the date you receive it and if the company lodged late the liability may already be locked down with no way to remit it. This guide covers the regime, the two types of notice, the service traps, the defences and the case law. Last reviewed 22 January 2026 · Reviewed by [Jamie Nuich](/attorney/jamie-nuich), Legal Practitioner Director ## Key Takeaways - A director penalty is a parallel personal liability for the company's unpaid PAYG withholding, GST and SGC under Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth). The penalty arises automatically when the company misses the due date and the notice is only the precondition to the ATO recovering it. - There are two practical types of DPN. You can remit a standard notice within 21 days by paying the debt or putting the company into administration, small business restructuring or liquidation. A lockdown notice allows no remission except payment in full and it applies wherever the company reported PAYG withholding or GST more than 3 months late or reported SGC after its due date. - The 21 days starts when the ATO posts the notice to your address on the ASIC register and actual receipt is irrelevant: Deputy Commissioner of Taxation v Tannous \[2016\] NSWSC 1654. An out of date ASIC address does not invalidate the notice. - New directors inherit exposure for liabilities due before their appointment unless the company pays, appoints an administrator or restructuring practitioner or begins winding up within 30 days of the appointment. Resigning within the 30 days does not save you. - The statutory defences are narrow and the courts apply them strictly. Relying on a co-director, accountant or bookkeeper is not a defence (Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113) and staying out of management is usually itself a breach (DCT v Robertson \[2009\] NSWSC 597). ![A director penalty notice and looming deadline, illustrating personal liability for company tax debts](/__l5e/assets-v1/47459875-df7d-418f-af6c-f803ac89be0b/dpn-deadline.png) In This Article 1. [1. What Is a Director Penalty?](#what-is-a-director-penalty) 2. [2. The Scale of Enforcement in 2026](#the-scale-of-enforcement-in-2026) 3. [3. Standard and Lockdown Notices: The 3 Month Rule](#standard-and-lockdown-notices-the-3-month-rule) 4. [4. Service: The 21 Days You Might Not Know About](#service-the-21-days-you-might-not-know-about) 5. [5. New Directors: The 30 Day Trap](#new-directors-the-30-day-trap) 6. [6. The Defences](#the-defences) 7. [7. What To Do in the 21 Days](#what-to-do-in-the-21-days) 8. [8. The Position in One Paragraph](#the-position-in-one-paragraph) If you are a director of a company that is behind on PAYG withholding, GST or superannuation, the ATO can recover those amounts from you personally. It does not need to prove misconduct and it does not need a court finding. The liability already exists as a parallel debt and the ATO can pursue it 21 days after posting a notice to the address on the ASIC register. Directors tend to learn how this regime works at the worst possible time, which is after the notice has gone in the post. The rules that matter most, the 3 month lodgement rule and the service rule in particular, do their damage before the notice ever arrives. This guide explains the regime as it stands, with the statutory provisions and the cases. **Received a DPN or expecting one?** The options narrow quickly. [Contact Astris Law](/contact) on (07) 3519 5616 for confidential advice. ## What Is a Director Penalty? Division 269 of Schedule 1 to the _Taxation Administration Act 1953_ (Cth) imposes a duty on each director to cause the company to pay its PAYG withholding, net GST (including luxury car tax and wine equalisation tax) and superannuation guarantee charge by the due date. If the company does not pay, each director becomes personally liable for a penalty equal to the unpaid amount. Three features of the design catch directors out. First, the penalty arises automatically. The personal liability comes into existence the moment the company misses the due date. The director penalty notice does not create the liability. It is the statutory precondition to the ATO commencing recovery, which it may do 21 days after giving the notice. Second, it is a parallel liability. The director's liability mirrors the company's, so a payment by the company reduces the director's penalty and a payment by the director reduces the company's debt and every other director's penalty. Where there are multiple directors, each owes the full amount rather than a share. Third, it survives the company. Liquidation and deregistration do not extinguish the director's penalty. Law Administration Practice Statement PS LA 2011/18 sets out the ATO's approach to recovering these liabilities. The regime applies to the directors of the company at the relevant time and to people who become directors later. The definition of director picks up the Corporations Act concepts, so de facto directors can be exposed. If you are running the company, the title on the ASIC register is not the end of the analysis. The same reach appears in the insolvent trading context, which we cover in our [guide to section 588G](/article/insolvent-trading-directors-guide-section-588g). ## The Scale of Enforcement in 2026 For most of the 2010s the ATO used the DPN sparingly. That has changed. In 2024-25 the ATO issued more than 84,000 director penalty notices, an increase of 136% on the prior year, alongside more than 15,000 garnishee notices. The ATO has linked the escalation to collectable debt exceeding $105 billion, much of it unpaid PAYG withholding, GST and superannuation owed by small companies. The surge has consequences beyond the raw numbers. The Tax Ombudsman has announced a review of the ATO's use of DPNs in 2026 and until that review reports, any director of a company carrying tax debt should treat a DPN as a probability rather than a possibility. There is also a cost dimension that did not exist before. From 1 July 2025, general interest charge and shortfall interest charge are no longer tax deductible. GIC compounds daily, so a tax debt that deductibility once partially subsidised now grows at its full rate. Carrying ATO debt as informal working capital, long a habit in small business, has become materially more expensive at the same time as enforcement has hardened. ## Standard and Lockdown Notices: The 3 Month Rule Every DPN gives the ATO the right to recover after 21 days. The difference between the two types of notice is what you can do inside those 21 days. ### Standard (non-lockdown) DPN If the company reported the liability on time or within 3 months of the due date, you can have the penalty remitted within 21 days of the notice if any one of the following occurs: 1. The company pays the debt in full. 2. An administrator is appointed. 3. A small business restructuring practitioner is appointed. 4. The company begins to be wound up. Remission through administration, restructuring or liquidation does not make the company's debt disappear. It removes your personal liability for it and that is the entire value of acting inside the 21 days. ### Lockdown DPN If the company reported PAYG withholding or GST more than 3 months after the due date, or never reported it, the only way to remit the penalty is to pay the company liability in full. Appointing an administrator or liquidator does nothing for your personal position because the liability is locked down. For SGC the rule is stricter again. The company must lodge the SGC statement by its due date and a statement lodged even one day late puts the penalty in lockdown territory. There is no 3 month grace. Where the company has not reported at all, the ATO may issue its own reasonable estimate of the unpaid amount and issue DPNs on the estimate. The law treats estimated liabilities as never reported, which means lockdown. The practical rule that falls out of this is simple and most directors have never heard it: lodge on time even if you cannot pay. Lodgement preserves the remission options. A company that lodges its BAS on time and pays nothing leaves its directors in a far better legal position than a company that pays half and lodges six months late. Our [lockdown DPN guide](/article/lockdown-dpn-director-penalty) covers the classification rules in detail. ## Service: The 21 Days You Might Not Know About The ATO gives a DPN by posting it to the director's address as recorded with ASIC or, failing that, the address last known to the ATO. The 21 days runs from the day the ATO posts the notice or leaves it at the address. The courts have confirmed how unforgiving this is. In _Deputy Commissioner of Taxation v Tannous_ \[2016\] NSWSC 1654 the court held that the notice is taken to be given at the time of posting and that the provision excludes the usual presumption about delivery in the Acts Interpretation Act. The Commissioner does not need to prove you received it. A correctly addressed envelope in a post box is enough. The implications are blunt. If your residential address on the ASIC register is a former home, an old accountant's office or anywhere you do not actually collect mail, the ATO can validly serve a DPN, let it expire and move to recovery without you ever seeing it. Checking and updating your ASIC address is the cheapest piece of asset protection available to any Australian director. ## New Directors: The 30 Day Trap Before accepting an appointment to an existing company, check its lodgement and payment position for PAYG withholding, GST and superannuation. A new director becomes liable for director penalties relating to amounts due before their appointment unless, within 30 days of the appointment, the company pays the outstanding amounts, appoints an administrator or small business restructuring practitioner or begins winding up. Resigning inside the 30 days does not avoid the liability, so the only safe sequence is due diligence first and appointment second. A director who joins a company with an undisclosed SGC history can inherit a locked down penalty for conduct that occurred entirely before they arrived. Former directors do not escape either. Resignation does not remove liability for amounts that were due before the resignation and liability can attach to amounts that fall due after resignation where the relevant reporting period had already begun or the first withholding event had already occurred. Leaving the board is not an exit from the regime. ## The Defences The legislation sets out three defences and the ATO will consider them at any time, including before recovery action. They are narrow and the director carries the burden. ### 1\. Non-participation due to illness or another good reason You did not take part in the management of the company during the relevant period and it would have been unreasonable to expect you to, because of illness or some other good reason. The courts have stripped this defence of most of the content directors hope it has. In _DCT v Robertson_ \[2009\] NSWSC 597 the court confirmed that a director's non-participation in management will usually itself involve a breach of the duty, whether the director is aware of it or not. Being a passive director, a spouse director or a director in name only is not a defence. In most cases it is the breach. ### 2\. All reasonable steps You took all reasonable steps, unless there were none you could have taken, to ensure that the company paid, an administrator or restructuring practitioner was appointed or winding up began. Two cases define the boundaries. In _Deputy Commissioner of Taxation v Clark_ (2003) 57 NSWLR 113 the New South Wales Court of Appeal confirmed that relying on others, including fellow directors and professional advisers, does not discharge the duty. In _Roche v Deputy Commissioner of Taxation_ \[2015\] WASCA 196 the court held that 'all reasonable steps' requires the director to address each of the alternative courses of action, not just one. And in _Canty v Deputy Commissioner of Taxation_ \[2005\] NSWCA 84 the court confirmed that the defence must cover the entire period from when the obligation arose and that resignation does not alleviate the penalty. The combined effect is that a director who agitated for payment, was outvoted and then did nothing further has not taken all reasonable steps. The provision expects escalation through to administration or winding up if that is what payment requires. ### 3\. Reasonably arguable position (SGC and GST only) For superannuation guarantee charge and GST liabilities, you have a defence where the company applied the relevant Act in a way that was reasonably arguable and took reasonable care in doing so. The classic territory is a genuine, considered classification of workers as contractors rather than employees that later proves wrong. The defence does not protect a company that simply never turned its mind to the question. ### Running a defence You submit a defence to the Commissioner in writing identifying which defence you rely on. You can also raise it in recovery proceedings. If the ATO rejects the defence, you may be able to seek judicial review under the Administrative Decisions (Judicial Review) Act 1977, provided you lodged the defence within 60 days of a garnishee notice or written notice of recovery. The ATO can still consider defences raised outside that window but its decision is not reviewable on that pathway, so get advice before lodging rather than after a rejection. ## What To Do in the 21 Days If a DPN has arrived, the sequence matters more than the sentiment. In rough order: - Establish which type of notice you hold. Pull the company's lodgement history, because if the company reported the liabilities within the windows the full menu of remission options is open and if not you are dealing with lockdown amounts and the analysis changes entirely. - Verify the amounts. DPNs issued on ATO estimates can overstate the true liability and while you can challenge an estimate, the challenge does not pause the 21 days. - Confirm the date of posting. The deadline runs from posting rather than receipt, so if the notice spent a week in the mail you have 14 days, not 21. - Decide the company question honestly. If the company cannot pay, the remission options are administration, small business restructuring or liquidation and each must actually commence within the 21 days. Restructuring and administration take time to arrange and day 18 is too late to start. - Consider the defences early. A genuinely available defence shapes everything else, but if none exists, do not spend the 21 days drafting one while the remission window closes. - Do not pay the ATO from personal funds reflexively. Sometimes payment is right and sometimes it converts a remittable corporate problem into a sunk personal cost. Take advice first and pay second. A director penalty notice is also a solvency event for the company. The same facts that produced the DPN, unpaid tax debts and late lodgements, are classic indicators of insolvency and they will disqualify the company from the safe harbour in s 588GA, which requires tax lodgements to be substantially current. The DPN analysis and the insolvent trading analysis have to run together and our [section 588G guide](/article/insolvent-trading-directors-guide-section-588g) covers the second half of that conversation. For a day by day playbook on the response itself, see [Responding to a DPN: The First 21 Days](/article/responding-to-dpn-21-days). ## The Position in One Paragraph Lodge on time even when the company cannot pay, because lodgement preserves remission. Keep your ASIC address current, because service is valid whether or not you see the notice. Do due diligence before joining any board, because new directors inherit old penalties after 30 days. Do not rely on anyone else to have done these things, because reliance is not a defence. And if a notice arrives, treat the 21 days as the entire field of play, because for a standard DPN it is and for a lockdown DPN the field has already closed. This guide is part of our [Director Liability and ATO Compliance hub](/resources/director-liability-ato-compliance), which collects the full series alongside our related guides on insolvency and directors' duties. If you would like confidential advice on a director penalty notice, your exposure as a current, former or incoming director or the company's position more broadly, please [get in touch](/contact) or call (07) 3519 5616. ## Sources and References - Legislation Taxation Administration Act 1953 (Cth) Sch 1 Div 269 - Legislation Administrative Decisions (Judicial Review) Act 1977 (Cth) - Case law Deputy Commissioner of Taxation v Tannous \[2016\] NSWSC 1654 - Case law Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113 - Case law Canty v Deputy Commissioner of Taxation \[2005\] NSWCA 84 - Case law Deputy Commissioner of Taxation v Robertson \[2009\] NSWSC 597 - Case law Roche v Deputy Commissioner of Taxation \[2015\] WASCA 196 - Regulator ATO, Director penalties (QC 44005) - Regulator ATO, Law Administration Practice Statement PS LA 2011/18 - Regulator ATO, Denying deductions for ATO interest charges (GIC and SIC non-deductible from 1 July 2025) - Other Tax Ombudsman, announced 2026 review of the DPN regime and FY2024-25 enforcement statistics, as reported by SmartCompany ![Jamie Nuich, Legal Practitioner Director at Astris Law](/images/jamie-nuich-portrait.jpg) ### [Jamie Nuich](/attorney/jamie-nuich) Legal Practitioner Director - Admitted as a Solicitor of the Supreme Court of Queensland - Admitted as a Solicitor of the High Court of Australia - 15+ years advising directors on commercial law, litigation, regulatory investigations and workplace matters Jamie is the founder and Legal Practitioner Director of Astris Law. She has acted first-hand for directors in urgent injunction applications, shareholder disputes, ASIC prosecutions and regulator-led investigations across Federal and State jurisdictions. She is a solicitor advocate who runs her own applications and trials where appropriate, so clients keep continuity from first advice through to hearing. 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