The Australian Taxation Office has significantly ramped up its enforcement actions against company directors in recent years.

What Exactly Is a Director Penalty Notice?

A Director Penalty Notice (DPN) is a powerful enforcement tool that allows the ATO to make company directors personally liable for specific company tax debts. This means your personal assets – including your home, car, and savings – could be at risk.

Three Types of Tax Debts Covered by DPNs:

1. Pay As You Go (PAYG) withholding: Employee tax withheld from wages
2. Superannuation Guarantee Charge (SGC): Unpaid employee superannuation
3. Goods and Services Tax (GST): A more recent addition that has expanded the scope of personal liability

The Two Types of DPNs You Could Receive

1. Lockdown DPNs

These are the most severe notices and provide no escape routes. They’re issued when a company has:

• Failed to pay its tax obligations, AND
• Failed to lodge the required documents (BAS, SGC statements, etc.) within three months of the due date

With a Lockdown DPN, directors become immediately personally liable with no relief options except paying the full debt amount.

2. Standard DPNs

These notices provide a 21-day window for action when a company has:

• Lodged all required documents on time, but
• Failed to pay the associated tax obligations

Directors have exactly 21 days from the date of the notice to take one of these actions:

• Pay the debt in full
• Appoint a Voluntary Administrator
• Appoint a Small Business Restructuring Practitioner (SBRP)
• Place the company into liquidation

The Hidden Dangers Many Directors Don’t Realise

• Director liability exists even after resignation – You remain liable for debts incurred during your directorship
• New directors can inherit liability – You could become liable for existing debts 30 days after becoming a director
• No corporate veil protection – DPNs pierce the corporate veil that typically protects directors
• ATO data matching is more sophisticated than ever – The ATO’s detection systems now identify non-compliance with unprecedented accuracy

Recent Changes to DPN Legislation

• GST obligations are now firmly established as personally recoverable debts
• The ATO has enhanced powers to offset tax refunds against DPN liabilities

Strategic Actions If You Receive a DPN

1. Act immediately – The 21-day window is non-negotiable and starts from the date of the notice, not when you receive it
2. Consult David Levi, Registered Liquidator – Get expert advice on your specific situation
3. Determine if the business is viable for rescue
4. If appropriate, appoint an Administrator, SBRP, or Liquidator
5. Evaluate personal asset protection strategies

Expert Assistance When You Need It Most

At Levi Consulting, we specialise in helping directors navigate the complex challenges of ATO enforcement actions. David Levi is a Registered Liquidator who can act as an Administrator, Liquidator, or Small Business Restructuring Practitioner.

Don’t wait until it’s too late – for a confidential discussion about your specific situation, contact David Levi directly at 0418 602 466 or reach out via direct message.