ℹ️ General information only – not legal, tax or insolvency advice. Director penalty rules have strict time limits and depend on your circumstances. If you have received a DPN, get advice immediately.
A director penalty notice (DPN) is one of the most serious letters a company director can receive from the tax office. It means you could be personally liable for your company’s unpaid PAYG withholding, GST or super – and you only have 21 days to act. Unfortunately, many directors make mistakes in those first few days that limit their options. Here are the seven most common – and what to do instead.
Mistake 1: Waiting until you “have time” to read it
The 21 days starts on the day the DPN is posted (or left at your ASIC-registered address) – not when you open the envelope. If the letter sat in a pile of mail for a week, you may already have only two weeks left.
Do instead: check the date on the notice straight away, work out your deadline, and get advice the same day.
Mistake 2: Thinking resigning as a director will fix it
Resigning does not remove a director penalty. You can stay liable for amounts that were due – or that relate to periods – while you were a director, even after the company is deregistered.
Do instead: deal with the debt or the company’s situation directly. Resigning may make it harder to influence what happens next.
Mistake 3: Not knowing whether it’s a “lockdown” DPN
This is the most important question. If the company reported its PAYG withholding and GST within 3 months of the due date (or its super guarantee charge by the due date), you may have more options – such as appointing an administrator or small business restructuring practitioner, or winding up the company within the 21 days.
If the amounts were reported late, never reported, or estimated by the tax office, it is a lockdown penalty. The only way to remit it is to pay the company debt in full.
Do instead: find out exactly which amounts on your DPN are lockdown and which are not.
Mistake 4: Ignoring the other directors
Director penalties are “parallel” liabilities. Each director can receive a DPN for the full amount, and any payment by the company or any director reduces everyone’s liability. Directors who don’t talk to each other often duplicate effort – or assume someone else is handling it.
Do instead: speak with your co-directors early and agree on a plan.
Mistake 5: Relying on your bookkeeper or co-director as a defence
There are defences to a DPN – for example, if illness genuinely stopped you taking part in managing the company, or you took all reasonable steps. But the courts have said that relying on others, including fellow directors and advisers, is not a defence.
Do instead: if you believe you have a defence, get advice about it promptly and put it in writing.
Mistake 6: Stopping your lodgements because you can’t pay
Many struggling companies stop lodging BAS and super reports because they can’t pay. This is exactly what turns a manageable situation into a lockdown DPN.
Do instead: keep lodging on time even if you can’t pay, and talk to the tax office about a payment plan. Reporting on time keeps more options open.
Mistake 7: Joining a company without checking its tax debts
New directors can become liable for unpaid amounts that existed before they joined – unless, within 30 days of appointment, the company pays the debt, appoints an administrator or small business restructuring practitioner, or is wound up.
Do instead: before accepting a directorship, ask for the company’s tax and super position in writing.
What happens if you do nothing?
- Your personal tax refunds can be used to pay the penalty
- Garnishee notices can be sent to your bank or employer
- Legal action can be taken against you personally
- The tax office may take other firmer action
Frequently asked questions
Can I negotiate a payment plan after a DPN?
The tax office says you can engage with them and negotiate a payment plan for the company debt within the 21 days. A plan is not the same as remitting the penalty, so get advice.
Does Payday Super affect director penalties?
Since 1 July 2026, super must be paid with each payday. Unpaid super can lead to super guarantee charge – and directors can be personally liable for unpaid SGC. Keep payroll and super up to date.
Who can help with administration or liquidation?
These processes must be carried out by a registered insolvency practitioner. Your accountant and lawyer can help you work out whether they suit your situation.
Key takeaways
- You have 21 days from when the DPN was posted
- Lockdown penalties can only be removed by paying in full
- Resigning doesn’t make the liability go away
- Keep lodging on time even when you can’t pay
- Get advice immediately
Talk to UV TAX
If you have received a director penalty notice, call 0466 268 405 or (03) 9007 7892 today. Read our full guide: Director Penalty Notice – what to do in the next 21 days.
Related: Director Penalty Notices · Small Business Restructuring · Tax Debt Help · Departure Prohibition Orders · Payday Super
This article is general information only and is not legal, tax or insolvency advice. UV TAX is a registered tax agent, not a law firm or registered insolvency practitioner. Outcomes are decided by the tax office or the courts and cannot be guaranteed. Please seek advice about your situation.