Director Penalty Notices — protect yourself from personal liability

Under Division 269 of the Taxation Administration Act 1953, the ATO may issue a DPN when a company has failed to remit PAYG withholding amounts or pay superannuation guarantee charge (SGC) by the due date. Once the company's obligation arises and remains unpaid, each director at the time the obligation arose becomes liable for a penalty equal to the unpaid amount. The ATO is not required to exhaust recovery against the company before pursuing directors personally.

A non-lockdown DPN is issued when the company's BAS or SGC statement was lodged on time. In this case the director has 21 days from receipt of the DPN to cause the company to pay the debt, appoint a voluntary administrator, or appoint a liquidator — and doing so within that window extinguishes the penalty. A lockdown DPN is issued when the BAS or SGC statement was not lodged within three months of the due date. With a lockdown DPN, there is no 21-day escape route — the director's personal liability is effectively crystallised and the only options are to pay or challenge the notice.

Within the 21-day window a director can: (1) cause the company to pay the outstanding PAYG or SGC in full; (2) appoint a voluntary administrator under Part 5.3A of the Corporations Act 2001; or (3) cause the company to begin winding up (liquidation). Any of these three actions extinguishes the director's personal liability for the penalty. It is critical to act before the window closes — once it expires the ATO may commence recovery proceedings against the director personally without further notice.

Yes. Under the TAA 1953 each director who held office when the PAYG or SGC obligation arose is jointly and severally liable for the full penalty amount. This means the ATO can recover the entire amount from any one director, regardless of how responsibility was internally allocated among the directors. If one director pays the full penalty they may have a contribution claim against co-directors, but that is a separate private legal matter. Co-directors cannot reduce their liability simply by pointing to each other.

Yes. Director liability under the DPN regime attaches at the time the obligation arose — that is, when the PAYG or SGC was due to be remitted. If you were a director at that time, resigning afterwards does not remove your exposure. The ATO can issue the DPN to your last known address. However, a person who resigned more than 30 days before the DPN is issued may have a defence if they took all reasonable steps to ensure the company complied or to have an administrator or liquidator appointed. Legal advice should be sought urgently if you have resigned and still received a DPN.

Yes, in limited circumstances. A director may challenge a DPN on the basis that: the underlying debt does not exist or the amount is wrong; the director was not a director at the relevant time; the DPN was not validly issued or served; or the director took all reasonable steps to ensure compliance (the reasonable steps defence). These defences are narrow and require prompt legal action. A lawyer experienced in ATO enforcement can assess whether a challenge is viable and advise on whether it is better to challenge the notice or to resolve the position through administration or payment.