If you’re a company director, ignoring the ATO Directors Penalty Notice could leave you personally liable for unpaid company tax debt. Here’s how to stay protected.
Running a business is hard enough without worrying about personal liability—but if you’re a company director, the ATO has a tool that could put your personal finances at risk: the ATO Directors Penalty Notice.
This isn’t just an administrative headache. Get it wrong, and you could be personally responsible for your company’s PAYG and superannuation debts.
If you’ve never heard of this notice before, don’t worry—you’re not alone. But let’s fix that now before the ATO comes knocking.
What is an ATO Directors Penalty Notice?
An ATO Directors Penalty Notice (DPN) is a legal notice issued by the Australian Taxation Office to make directors personally liable for certain unpaid company tax debts.
Yes, even if your company is a Pty Ltd structure, this can happen.
It primarily applies to:
- PAYG Withholding (the tax you withhold from employees’ wages), and
- Superannuation Guarantee Charges (SGC – unpaid super, plus interest and penalties).
- GST
In other words, if your company doesn’t pay these on time, the ATO can chase you—personally.
Why Small Business Owners Often Miss This
Many small business owners operate under the assumption that a Pty Ltd structure protects them from personal liability. And in most cases, it does—until the ATO steps in.
We recently worked with a builder—let’s call him Matt—who had fallen behind on his team’s superannuation. He assumed the accountant would “sort it out later.” Unfortunately, the lodgements were also late, and when the ATO issued a Lockdown Directors Penalty Notice, Matt was personally liable for over $65,000.
He was devastated. But it could have been avoided.
Understanding Your Risk as a Director
The 2 Types of ATO Directors Penalty Notices
There are two kinds of DPNs, and understanding the difference is critical:
- Non-Lockdown DPN
- Issued when your company has lodged BAS and super forms on time, but not paid the debts.
- You have 21 days from the date of the notice (not when you receive it!) to:
- Pay the debt,
- Place the company into administration, or
- Begin the liquidation process.
- If you act in time, you can avoid personal liability.
- Lockdown DPN
- Issued when your company hasn’t lodged the required forms on time.
- There’s no 21-day grace period. You are automatically personally liable for the debt.
- The only option is to pay the debt in full.
➡️ The takeaway: Always lodge on time—even if you can’t pay.
How Late Lodgement Affects Company Tax Debt
One of the biggest mistakes directors make is delaying lodgements because they can’t afford to pay.
But here’s the kicker—lodging late is what turns a manageable company tax debt into a personal one.
The ATO doesn’t expect magic. If you can’t pay, there are options. But if you don’t lodge? That’s when the gloves come off.
What Happens If You Receive a DPN?
Steps to Take Immediately
If you’ve received a DPN, here’s what to do—fast:
- Check the date on the notice. Your 21-day window starts from that date.
- Get advice immediately. Time is not on your side.
- Take action. Whether that’s paying the debt, restructuring, or entering administration—do something.
- Don’t ignore it. If you freeze or delay, the consequences can escalate quickly.
This is one of those times where having a proactive accountant in your corner makes all the difference.
Your Director Duties Go Beyond Business Strategy
When you become a company director in Australia, you’re not just signing up for strategy meetings and cash flow management.
You’re taking on legal obligations—and one of them is making sure the company pays its company tax debt on time.
Check out the ATO’s guidelines on Director responsibilities for more insight.
How to Stay Compliant and Reduce Risk
Here are some simple but powerful habits that protect you from DPN risk:
- Always lodge BAS and superannuation guarantee statements on time. Even if you can’t pay.
- Set calendar reminders and use accounting software like Xero or QuickBooks to stay on top of due dates.
- Have regular meetings with your accountant—don’t just catch up at tax time.
- Check your registered office address. The ATO sends DPNs here, and missing one could be disastrous.
A Quick Health Check for Your Business
Ask yourself:
- Are all my company’s PAYG and super lodgements up to date?
- Am I sure that payments are being made in full and on time?
- Have I reviewed my ATO account balances recently?
If you’re unsure about any of the above—now is the time to check.
Trusted Resources for Business Directors
Want more on this topic? These are excellent places to start:
Need Help? We’re Here for You.
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👉 Book a no-obligation meeting here:
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