Director penalty notice lawyers

A director penalty notice (DPN) is a notice from the ATO telling you that, as a company director, you are personally liable for a penalty equal to the company's unpaid PAYG withholding, GST or superannuation guarantee charge. The liability arises under the law before the notice is sent, and the notice is what the ATO must give you before it can sue you for it. It's one of the most serious letters the ATO sends, and your options shrink quickly once it is given.

We act for directors of small and medium businesses across Australia, as part of our wider work on tax debts. Our team includes lawyers and a Chartered Accountant, so we look at the numbers and the law together and tell you plainly what's possible. If a notice has just arrived, start with our guide on what to do if you receive a director penalty notice.

What is a director penalty notice?

Under Division 269 of Schedule 1 to the Taxation Administration Act 1953 (TAA), directors must make sure the company meets its PAYG withholding, GST and super guarantee obligations, or promptly goes into voluntary administration, small business restructuring or liquidation (s 269-5, s 269-15). If the company hasn't done one of those things by the due date, each director becomes liable for a penalty equal to the unpaid amount (s 269-20). Section references below are to Schedule 1 of the TAA unless we say otherwise.

The DPN is the ATO's formal notice of that penalty. It must set out what the ATO thinks is the unpaid amount, state that you are liable for a penalty equal to it, and explain the main circumstances in which the penalty will be remitted (s 269-25(2)).

• Every director is liable for the full amount. A payment by the company or any director reduces everyone's liability by the same amount (s 269-40), and a director who pays has rights of indemnity against the company and contribution from the other directors liable for the same debt (s 269-45).
• Estimates count. The ATO can estimate unpaid amounts and issue a DPN for the estimate (Div 268, s 269-10(4)). You remain liable for the estimate even if the real liability turns out to be lower (s 269-15(2A)), unless the estimate itself is reduced or revoked under Div 268.
• GST is included for tax periods and GST instalment quarters starting on or after 1 April 2020 (ATO practice statement PS LA 2011/18, para 47).

How long do you have to respond to a DPN?

The ATO can't begin court proceedings to recover the penalty until 21 days after it gives you the notice (s 269-25(1)). The penalty is already due and payable (s 269-20(2), (4)), so the 21 days isn't a grace period. It is the window in which company action can still remit the penalty.

The penalty is generally remitted if the company does one of these within 21 days of the notice being given (s 269-30(1)):

• pays the debt in full,
• appoints a voluntary administrator,
• appoints a small business restructuring practitioner, or
• begins to be wound up.

A voluntary winding up generally begins when the members pass the special resolution, and a court winding up generally begins when the order is made, not when the application is filed (Corporations Act 2001, s 513A, s 513B).

After 21 days, appointing an administrator or restructuring practitioner, or winding up the company, no longer remits your penalty. Any amount later paid towards the company's debt still reduces it (s 269-40).

The notice is treated as given when the ATO posts it or leaves it at your address, not when you read it (s 269-25(4)). The ATO can use an address for you taken from ASIC's records (s 269-50), so an out-of-date ASIC address can mean the 21 days are running before you know about the notice.

What is a lockdown DPN?

A "lockdown" DPN covers amounts the company didn't report on time. For those amounts, appointing an administrator or restructuring practitioner, or winding up the company, won't remit the penalty once the reporting deadline in the table has passed (s 269-30(2)).

Debt	Not locked down if the company reported it...
PAYG withholding	in an activity statement or through Single Touch Payroll, within 3 months after the due date
GST	by lodging the BAS within 3 months after the due date
Super guarantee charge (wages paid from 1 July 2026)	by lodging a voluntary disclosure statement for the payday with the ATO by the due date for the charge
Super guarantee charge (quarters ending on or before 30 June 2026)	by lodging the super guarantee statement for the quarter by its due date, the 28th day of the second month after the quarter ended (PS LA 2011/18, paras 47 and 59)

One notice can be partly locked down and partly not, for example where some amounts were reported on time and others weren't, or where the company reported less than it owed. Penalties based on ATO estimates are generally locked down in full once the same deadlines pass (s 269-30(2), items 2, 4 and 6).

Under Payday Super, the due date for super guarantee charge for these purposes is 60 days after the day the employer paid the employee's qualifying earnings, broadly their wages (the "QE day"), or earlier if the ATO assesses the charge sooner (s 269-10(3); Superannuation Guarantee (Administration) Act 1992 (SGAA), ss 17A and 36(4)). Unless the company lodged a voluntary disclosure statement for that day by the due date, and before the day the ATO assessed the charge, the whole amount is locked down. If it did lodge one, any amount the statement understated is locked down (s 269-30(2), item 3; SGAA s 33).

These Payday Super rules apply only to qualifying earnings paid on or after 1 July 2026. For quarters ending on or before 30 June 2026, the former rules still apply: the charge is treated as due on the day the super guarantee statement for the quarter was due, and is locked down unless the company lodged that statement by then (Treasury Laws Amendment (Payday Superannuation) Act 2025, Sch 1, item 183).

For lockdown amounts, the realistic options are usually paying, a payment arrangement or a defence. See our guide to lockdown DPNs.

Can you get a payment plan for a DPN?

The ATO can agree to let a debt be paid by instalments (s 255-15). While an arrangement covering the company's debt is in force, the ATO can't start, or take a step in, court proceedings to recover the director penalty (s 269-15(3)). But a payment plan:

• doesn't remit the penalty or extend the 21 days for the company-level options (s 269-15(2), s 269-30(1)),
• doesn't stop the ATO giving you a DPN (s 269-15(3), note 2), and
• doesn't stop general interest charge running on the debt (s 255-15(2)).

See our guide to DPN payment plans.

What are the defences to a director penalty notice?

The law recognises three main defences (s 269-35):

1. Illness or other good reason. It would have been unreasonable to expect you to take part in managing the company, and you didn't.
2. All reasonable steps. You took all reasonable steps to make sure the company paid, appointed an administrator or restructuring practitioner, or began winding up, or there were no reasonable steps you could have taken.
3. Reasonably arguable position. This applies to super guarantee charge and GST only. The company took a reasonably arguable position on how the law applied and took reasonable care.

Defences turn on evidence: board minutes, emails, advice received, cash-flow records and dates.

For the first two defences, if the ATO recovers any of the penalty outside court, you must give it information supporting the defence within 60 days, and the ATO must be satisfied on that information (s 269-35(4A)). The 60 days start on the day the ATO sends you a copy of a garnishee notice (s 260-5(6)) or otherwise notifies you in writing that it has recovered some of the penalty, not when you first hear about it. In court, you must prove those two defences (s 269-35(4)). See our guide to DPN defences.

Are new and resigned directors liable for a DPN?

• New directors. If you join after a debt has fallen due, you become liable for it if, 30 days after you joined, the company still hasn't paid or gone into administration, restructuring or liquidation (s 269-20(3)). If you join during or after the usual 3-month reporting period for PAYG withholding or GST, the 3 months run from the day you became a director instead (s 269-30(3)). If you joined before the due date, you are liable in the same way as the other directors (s 269-20(1)).
• Resigned directors. Resigning usually doesn't end liability for amounts where the obligation arose while you were a director, even if they fell due after you left (s 269-20(1)). If ASIC isn't notified within 28 days, the resignation generally takes effect only when notice is lodged, unless ASIC or the court fixes the earlier date (Corporations Act, s 203AA). A resignation that would leave the company with no director generally doesn't take effect at all (Corporations Act, s 203AB).

Our guide to DPNs for new and resigned directors covers the dates that matter.

What happens to a DPN after liquidation?

Liquidation remits the penalty only if the company begins to be wound up before the ATO gives the notice or within 21 days after, and then generally only for amounts that aren't locked down (s 269-30(1), (2)). Otherwise the penalty stays with you personally, and the ATO can pursue directors after the company has been wound up.

• Anything the liquidator pays the ATO towards the company's debt reduces your penalty by the same amount (s 269-40).
• If a liquidator recovers PAYG withholding payments (or payments of a super guarantee estimate) from the ATO as unfair preferences, those who were directors when the payment was made may have to indemnify the ATO (Corporations Act, s 588FGA, with defences in s 588FGB).

Our guide to DPNs after liquidation explains the timing, the liquidator's role and what happens if a director becomes bankrupt.

How we help with a director penalty notice

• Check the notice. We confirm whether it is valid, what it covers and exactly when your 21 days end, and use lodgement and ASIC records to work out whether any of it is locked down.
• Map your options. We set out paying, administration or restructuring, a payment arrangement and any defence, with the cost and risk of each.
• Deal with the ATO. We prepare defence submissions and negotiate payment arrangements and the timing of recovery action.
• Look at the interest. We review whether to ask the ATO to remit the general interest charge on the debt.
• Work with your accountant. If your accountant is already involved, we work alongside them and keep them informed.

Next step

Send us every page of the notice and tell us the date it arrived. Add the company's ATO account statement, the dates its activity statements and super guarantee reports were lodged, and the dates you became or stopped being a director. In a short first call we'll work out how much time you have, whether any amounts are locked down and what to do first.