Australian Taxation Office (ATO) is continuing to issue Director Penalty Notices (DPN) to recover outstanding tax. Good.

What is a Director Penalty Notice?

A DPN is a formal notice issued by the ATO that can make company directors personally liable for specific company tax obligations including PAYGW, SGC and GST.

Types of DPNs

There are two types of DPNs:

1. Lockdown DPN – a lockdown DPN results in a director or former director being personally liable immediately upon issue.

2. Non-lockdown DPN – if the company has completed its lodgements but has not paid PAYG, SGC or GST, a director or former director has 21-days from the date of the notice to either:

• Pay the amount demanded;
• Appoint a voluntary administrator;
• Appoint a Small Business Restructuring Practitioner (SBRP) to propose a restructuring plan under Part 5.3B of the Corporations Act 2001;
• Appoint a liquidator.

If a director does not act within 21-days of the date of the notice, the director becomes personally liable for the amount demanded.

How Directors Should Respond to a DPN

If you receive a DPN, immediately seek professional help to assess your options.

The ATO’s Broader Enforcement Strategy

The ATO has adopted a range of targeted strategies to recover debts, particularly from businesses that fail to communicate or breach repayment arrangements. These include issuing DPNs, Garnishee notices, winding-up action and also, reporting tax debts to credit agencies.

Small Business Restructuring: A Viable Alternative

For small businesses facing ATO debts or a DPN, the Small Business Restructuring (SBR) process under Part 5.3B of the Corporations Act 2001 can provide a pathway to survival. This process allows eligible businesses to restructure their debts while continuing to operate under existing management.

The ATO considers various factors when assessing restructuring proposals, including compliance history, the likelihood of success, and any potential public interest concerns. Understanding ATO policies—such as those outlined in PS LA 2011/16—is essential when negotiating restructuring terms.

Protect Your Interests – Act Now

DPNs are a powerful debt recovery tool for the ATO. If you receive a DPN, or your company is in arrears with lodgements and or payments to ATO then seek expert advice immediately to explore your options and to avoid personal liability.

At Levi Consulting, we specialise in helping directors by performing business health-checks to identify options, navigate ATO enforcement actions, and we also accept appointment to restructure businesses through SBR, voluntary administration or other processes, if required.

For a confidential discussion, reach out to David Levi directly at 0418 602 466 or DM. Whether you are a director, accountant, or lawyer, our team is here to support you.