Director Penalty Notices: When Company Tax Debts Become Personal

For many business owners, operating through a company provides a degree of asset protection and separation between personal and business affairs.

However, when it comes to tax obligations, that protection is not absolute.

The ATO’s Director Penalty Notice (DPN) regime allows the Commissioner to pursue company directors personally for unpaid PAYG withholding, GST and Superannuation Guarantee Charge (SGC) liabilities. With the ATO continuing its debt recovery activities and issuing record numbers of DPNs, directors need to understand both their obligations and the consequences of falling behind.

What is a Director Penalty Notice?

A Director Penalty Notice is a formal notice issued by the ATO that makes a director personally liable for certain unpaid company tax debts.

The regime primarily applies to:

• PAYG withholding
• GST
• Superannuation Guarantee Charge (SGC)

While these liabilities belong to the company, the DPN regime allows the ATO to recover the debts directly from directors in their personal capacity.

Why are DPNs becoming more common?

The ATO has been increasingly focused on collecting outstanding tax debts as part of its broader debt recovery strategy.

According to the Tax Ombudsman, more than 84,000 DPNs were issued to directors of approximately 64,000 companies during the 2024-25 financial year, representing a significant increase on previous years.

Who are exposed to DPNs?

• Businesses that have accumulated tax debts over multiple periods
• Businesses with previous history of late payment and lodgement

Types of DPNS:

• Non-lockdown DPNs – A non-lockdown DPN generally arises where the company has lodged its BAS, IAS and SGC obligations on time but has not paid them. In these circumstances, directors generally have 21 days from the date the notice is issued to take action. Acting within the available timeframe may allow the personal liability to be remitted.
• Lockdown DPNs – A lockdown DPN is substantially more serious. These typically arise where required BAS, IAS or SGC statements have not been lodged within the relevant statutory timeframes. Once a liability becomes “locked down”, placing the company into administration or liquidation will generally not remove the director’s personal liability.

For a lockdown DPN, often the only solution is payment of debt.

Timely lodgement is just as important as timely payment.

The Biggest Misconception

One of the most common misunderstandings is that a DPN creates the director’s liability.

The personal liability often arises well before the DPN is issued. The DPN is simply the mechanism that allows the ATO to commence recovery action against the director after the relevant notice period expires.

By the time a DPN arrives, the director may already have very limited options available.

What directors need to do

The best strategy is prevention.

Directors should ensure they:

• understand the company’s tax position at all times
• review BAS, IAS and superannuation obligations regularly
• lodge all tax obligations on time, even if payment cannot be made immediately
• engage with advisers early when cash flow concerns arise, and
• seek advice immediately if a DPN is received.

Do not ignore ATO correspondence. If a DPN is not addressed, the ATO can commence legal proceedings, issue garnishee notices and pursue bankruptcy proceedings in serious cases.

If your business is struggling with tax debts, cash flow pressures or overdue lodgements, don’t wait for a DPN to arrive before getting advice. A proactive review of your position today may help preserve options, protect personal assets and provide a clearer path forward.

Want to understand your exposure as a director? Contact the Macro team to discuss your circumstances and explore the options available before personal liability becomes a reality.

Date: 02/10/2026
The Macro Group Limited AFSL: 485843 Tax Agent Number 24 76 5236.

The information in this article contains general information only. We have not taken into consideration any of your personal objectives, financial situation or needs. Before taking any action, you should consider whether the general advice contained in this communication is appropriate to you having regard to your circumstances and needs and seek appropriate professional advice if you think you need it. We recommend that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances.