Director Penalty Notices
Received an ATO director penalty notice (DPN)? Get outcome-focused guidance from former ATO lawyers to achieve the best possible outcome.
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How to read a DPN to understand your options
What is a DPN? How do you read it? What are your options?
We break down everything you need to know about interpreting Director Penalty Notices (DPNs) issued by the ATO.
Whether you’re a director, advisor, accountant, or insolvency practitioner, this video offers practical insights and strategies to help you navigate DPNs with confidence.
Watch VideoWhy have I received a director penalty notice?
DPNs are used to recover tax debts from company directors including:
- Pay As You Go (PAYG) withholding
- Goods and Services Tax (GST)
- Superannuation Guarantee Charge (SGC)
Traditionally, the ATO has issued DPNs after repeated attempts to contact the company for payment. However, during COVID-19, many companies accumulated debt without immediate consequences, leading to situations where the money was no longer available when the ATO sought to collect.
This is prompting the ATO to now issue DPNs earlier, while companies still have the funds to meet their obligations. In some situations, this enables directors to make timely decisions about whether to continue trading or consider insolvency processes.
Therefore, it is important to act quickly to maximise your options for dealing with your DPN, or to consider whether a defence applies.
Your four options inside the 21-day window
A standard DPN gives you four options inside the window.
Pay the debt in full.
The most straightforward option, where the funds are available. Payment must clear within the 21 days.
Appoint a Small Business Restructuring Practitioner.
Available only for eligible small businesses under the Small Business Restructuring regime. The appointment must be made within the 21 days.
Appoint a Voluntary Administrator.
Places the company into voluntary administration. The appointment must be made within the 21 days.
Appoint a liquidator.
Places the company into liquidation. The appointment must be made within the 21 days.
You can also enter a payment plan for the director penalty debt. The payment plan does not stop the DPN from running. If you later default on the plan, you do not get a further 21 days to avoid recovery action.
If your DPN is a “lockdown DPN” (issued where the company has been more than three months late in lodging its BAS or SGC), options 2, 3 and 4 above are not available. You can only pay the debt in full to avoid personal liability.
What can directors do after the 21 days have expired?
If the 21-day period of the DPN has expired, we can consider whether the underlying liability is correct, whether there is any invalidity in the ATO raising the liability or in issuing the DPN, or whether any statutory defences apply.
Review Aptum’s guide on whether you can dispute the underlying tax debt and the DPN at the same time, which is a common question once the window has closed.
To discuss the options available to you,
What are the director penalty notice defences?
You were not involved, and it was not reasonable for you to be involved, in managing the company due to illness or other good reasons
The first statutory defence can apply in circumstances where for illness or for some other good reason, you were actually not involved in managing the company at the relevant times. Importantly, it needs to be unreasonable to expect you to have managed the company.
All reasonable steps were taken to ensure the company complied with its obligations
The second statutory defence can apply where you took all reasonable steps to ensure the company met its obligations. Alternatively, that there were no reasonable steps you could have taken. Importantly, this needs to be shown from the period the liability first arose, not simply when you received the DPN.
Reasonable position under SGC or GST law
The third statutory defence is limited to SGC and GST DPNs where it can be shown that the company took a reasonably arguable position or showed reasonable care in applying the relevant tax law.
What stage is your ATO or SRO matter at?
DPNs are one part of the ATO recovery toolkit. Where your matter sits determines which Aptum service is right for you.
I have just received a DPN.
This is the right page. Aptum runs DPN diagnostic, pathway and execution.
I haven't been assessed yet but I have a tax issue I want to manage.
You need our Engagement with the ATO and SRO service. Engagement covers private rulings, voluntary disclosures, audit responses, In-House Facilitation and remission applications.
The ATO has issued an assessment I disagree with.
You need our Objections to Tax Assessments service. Objections are the formal way to challenge an assessment inside the ATO, with statutory deadlines.
The ATO has frozen my bank account, served a statutory demand, or started winding-up proceedings.
You need our ATO and SRO Debt Recovery service. Each recovery instrument has a defence and a window. The window is usually short.
My objection has been disallowed or my matter is heading to court.
You need our Tax Litigation service. Tax litigation covers ART reviews, Federal Court appeals, judicial review and defences to ATO court proceedings.
If you are not sure which category you are in, the diagnostic call sorts that out in 15 minutes.
What Aptum brings to your matters
Aptum’s tax disputes practice is led by Michael Buscema, our Practice Lead for Tax Disputes. For over 11 years prior to joining Aptum, Michael worked for the ATO and Commonwealth Treasury, holding a range of senior positions including acting Assistant Commissioner of the ATO. During his time at the ATO, Michael oversaw the ATO’s most complex, strategic recovery and engagement matters and was responsible for resolving multiple disputes valued over $100 million.
Michael is supported by Nigel Evans, Aptum’s Managing Director and Co-Founder. Before starting Aptum, Nigel spent 11 years at the commercial Victorian Bar, including work acting for the ATO in tax matters. Nigel is listed in Best Lawyers in Australia for Tax Law (2026) and recognised by Doyle’s Guide as a Leading Commercial Litigation and Dispute Resolution Lawyer.
That combination of ATO experience and Bar experience is not biography. It changes how we run your matter.
DPNs aren't a normal demand letter
A DPN is not a request. It is a statutory mechanism that makes a director personally liable for company PAYG, GST and SGC debt. The 21-day window is statutory. The four options available inside the window are statutory. The defences after the window are statutory. Treating a DPN like a normal commercial letter is the most common and the most expensive mistake we see.
The 21-day window starts when the ATO posts the notice
Not when you open it. Not when you read it. The day the ATO posts it is day 1. We see directors arrive at our office on day 14 having assumed they had three weeks from the day the notice landed on the desk. They don’t.
Posture matters as much as paperwork
Even where a defence applies, how the defence is run shapes the outcome. The ATO is under a statutory duty to recover tax debts unless they are irrecoverable at law or uneconomical to pursue. Knowing where the ATO has commercial flexibility and where it does not is the difference between a workable defence and an unanswered application.
What clients say
“Very grateful to Michael and the whole team at Aptum for everything they did on my case and for all their guidance and support to achieve the best outcome. Highly recommend this fantastic team. Thank you so much!”
- Tania“The whole team from the top of Aptum Legal down to the support team have all been very professional and always gone above and beyond for me and my family. I will highly recommend them for future work with people in my network needing legal professionals.”
- AnonymousHow we manage cost
What we commit to is one of our five client service promises: clear expectations as to the timing, costs and scope of our engagement, and updating those expectations as early as possible if anything changes.
Estimate and scope.
Once engaged, you receive a documented strategy and a cost forecast aligned to the stages of your matter. Stage-based budgets, regular reporting, and any scope changes documented and agreed in writing.
Fixed-price options for execution.
Where the matter has a defined scope (a single DPN response inside the 21-day window, a defence to a director penalty proceeding, a payment plan negotiation), we offer fixed-price options for the execution stage. This is a service Aptum has built specifically for DPN matters, and it is unusual for commercial litigation firms.
Investment mindset.
Aptum approaches every matter with an investment mindset: the most practical outcome in the shortest possible time, at the least possible cost, with the biggest possible return.
What happens when you engage Aptum
Aptum runs every matter under our project management framework, with clear expectations on timing, cost and scope from the first call. Before you pay us anything, you get two points of contact, both free, so you know exactly where you stand. No surprises.
Step 1
Value conversation
(free)
If the matter is one we can help with, we bring you in for a second conversation with the practice lead who would run your matter and your client experience coordinator. You get the time and expertise of a senior practitioner who has handled matters like yours, someone with real experience who can give you genuinely useful guidance on how to approach it. Real expertise before you have committed to anything, not a fake triage.
Step 2
Pathways assessment
(1-hour consultation)
Once you engage, you receive a documented strategy and a cost forecast aligned to the stages of your matter. For DPN matters that typically means assessing whether the 21-day window is still open and which of the four response options is genuinely available to you, or whether the window has expired and which defences or invalidity grounds apply. The pathways assessment is a 1-hour consultation that locks in the plan for dealing with the ATO.
Step 3
Execution
(fixed-price options)
Aptum offers fixed-price options for the execution stage on DPN matters. Where the scope is defined (a DPN response inside the 21-day window, a defence to a director penalty proceeding, a payment plan negotiation), we lock in a fixed price so you know exactly what the execution will cost. Routine documented strategy. Regular communications. A relentless focus on the essential issues. Project management isn’t a bolt-on at Aptum, it’s a discipline embedded in every part of our practice.
What makes Aptum different
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Specialist expertise.
All we do is litigate complex commercial and tax disputes.
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Legal intelligence framework.
Practical, ongoing risk assessment to focus on the essential.
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Project management framework.
Routine documented strategy through custom project management.
Recent matter outcomes
Two individuals pursued for AUD $17.8M Director Penalty Liability achieve significant debt reduction
Problem.
The ATO brought a claim for a summary judgment against two individuals to recover tax debt of AUD $17.8M.
Aptum’s role.
Aptum was engaged to dispute the application, and caused the ATO to withdraw the summary judgment application. Subsequently, orders were made for the ATO to pay Aptum’s clients’ costs of the summary judgment application. The ATO then pursued Aptum’s clients for reduced director penalty liabilities in the Federal Court of Australia. Aptum defended this action on the basis that our clients had been shut out from the company’s affairs by reason of the fraud committed by another director, and positioned the clients for negotiations with the ATO.
Outcome.
The ATO subsequently entered into settlement negotiations, with Aptum negotiating an outcome for the clients that represented a significant reduction in the original tax liability.
DPN defended on statutory defence grounds
Aptum was engaged to submit a defence to a DPN in circumstances where the director has acted quickly to try and repay the debt before putting the company into liquidation. Aptum lodged a defence that resolved the DPN claim in full by demonstrating the client took all reasonable steps.
Invalid DPN resolved
Aptum was able to have a DPN withdrawn and the penalties remitted in full by successfully arguing the notice was invalid as it was sent to an incorrect address.
Director Penalty Notices: Top FAQs from Directors & Agents
Michael Buscema, Aptum’s Practice Lead for Tax Disputes, has answered some frequently asked questions we receive from both company directors and agents (accountants) about DPNs.
Read Michael's full DPN FAQsFrequently Asked Questions
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What is a Director Penalty Notice and how is it different from a normal ATO debt?
A Director Penalty Notice (DPN) is the ATO’s mechanism to make a company director personally liable for the company’s unpaid PAYG withholding, GST and Superannuation Guarantee Charge. The key differences from a normal ATO debt: it sits on you personally, not the company; it has a 21-day window that starts the day the ATO posts the notice (not the day you receive it); and the standard DPN gives you four options to avoid personal liability (pay in full, appoint a Small Business Restructuring Practitioner, appoint a voluntary administrator, or appoint a liquidator).
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When does the 21-day clock start?
The day the ATO posts the DPN, not the day you receive it. The deadline does not extend for weekends, public holidays, postal delays, or because you were out of the office when it arrived. We see directors arrive at our office on day fourteen having assumed they had three weeks from the day the notice landed on the desk. They don’t.
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What's a "lockdown DPN"?
A lockdown DPN is a DPN issued where the company has been more than 3 months late in lodging its BAS, or simply missing the due date for SGC statements. The director is locked out of three of the four standard DPN options. The only way to avoid personal liability under a lockdown DPN is to pay the debt in full within the 21-day window. Voluntary administration, liquidation and Small Business Restructuring will not work.
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Can I dispute the underlying tax debt and the DPN at the same time?
Yes, in some circumstances. Aptum has published a guide on how this works, including the strategy, timelines, and risks involved. The short answer is that the underlying tax debt and the DPN are technically separate, and depending on when the underlying debt is challenged, you may be able to run both arguments together to protect against personal liability.
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What defences are available after the 21-day window has expired?
Three statutory defences apply. The first is where you were not involved in managing the company due to illness or some other good reason, and it would be unreasonable to expect you to have managed the company. The second is where you took all reasonable steps to ensure the company met its obligations, or there were no reasonable steps you could have taken. This needs to be shown from the period the liability first arose, not just from when you received the DPN. The third, which applies only to SGC and GST DPNs, is where the company took a reasonably arguable position or exercised reasonable care in applying the relevant tax law.
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I was never a director of the company. Can the ATO still recover a director penalty from me?
The ATO can issue a DPN to a person who is or has been a director of the company at the relevant time. There are also rules about “shadow directors” and “de facto directors” who, while not formally appointed, were effectively acting as directors. If you have received a DPN naming you as a director and you do not believe you ever were a director, the position needs to be assessed carefully and quickly because the 21-day window applies to you the same way.
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Can I enter a payment plan for a DPN?
Yes, but the payment plan does not stop the 21-day window. If the 21 days expire while you are negotiating or paying under a payment plan, you do not get a further 21 days to avoid recovery action. The payment plan can manage the debt itself, but the personal liability has crystallised.
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What happens if I just ignore the DPN?
The ATO can commence recovery proceedings against you personally for the amount in the DPN. This is one of the routes by which the ATO can ultimately reach assets in your name, including the family home, through bankruptcy. The ATO knows the debt is there, and ignoring the notice closes off the options that engagement would otherwise keep open.
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What should I do in the first 24 to 72 hours after receiving a DPN?
Aptum has published a step-by-step playbook for the first 24 to 72 hours after a DPN arrives. The short version: check the date of posting (that is day one), pull the BAS lodgement and SGC payment history for the periods in the DPN, identify which of the four 21-day options is actually open to you, and speak to an insolvency practitioner about your options. If the DPN is locked down or the 21 days has expired, you should seek legal advice.
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Do I need a lawyer, or can my accountant handle a DPN?
Once a DPN has been issued, you need a lawyer with tax-dispute experience. The deadlines are statutory, the responses require legal characterisation, and the consequences of getting it wrong include personal liability and bankruptcy. Legal privilege over your communications about strategy and options only attaches to communications with a lawyer. Your accountant can and should sit in the conversation, but a DPN response is lawyer-led work.
Offices
Aptum services DPN clients across Australia from three offices
Melbourne (head office)
(03) 7020 9230
Suite 7.01, Level 7, 419 Flinders Lane, Melbourne VIC 3000
Sydney
(02) 7202 3404
Level 1, 60 Martin Place, Sydney NSW 2000
Brisbane
(07) 3778 3693
Level 38, 71 Eagle Street, Brisbane QLD 4000
Further Reading on Aptum
Aptum publishes regularly on Director Penalty Notices, ATO recovery and director liability.
How the ATO Escalates from Director Penalty Notices to Winding Up or Bankruptcy
Understand the ATO’s enforcement pathway from director penalty notices through to company liquidation and personal bankruptcy, and where critical decisions must be made.
Standard vs Lockdown Director Penalty Notices: What Every Director Needs to Know
Understand the critical difference between standard and lockdown DPNs, what triggers each type, and the options you have (or lose) to protect yourself from personal liability.
Can You Dispute the Underlying Tax Debt and the DPN at the Same Time?
Learn how to dispute both a Director Penalty Notice and the underlying company tax debt simultaneously, including strategies, timelines, and risks to protect yourself from personal liability.
You Just Received a Director Penalty Notice, What Should You Do First?
Received a DPN from the ATO? Learn what to do in the first 21 days, your real options, and how to protect yourself from personal liability.
What is a Director Penalty Notice and When Can the ATO Issue One?
Director penalty notices make directors personally liable for company tax debts. Learn when the ATO issues DPNs and what your 21-day window really means.
Director Penalty Notices: Top FAQs from Directors & Agents
With a recent uptick in the number of director penalty notices (DPNs) being issued by the Australian Taxation Office (ATO),…
A DPN is the start of a clock you didn't set.
The 21 days began the day the ATO posted the notice. Every day spent working out whether to engage a lawyer is a day off your window.
Aptum’s tax disputes team will tell you exactly where you stand, which of the four 21-day options is genuinely open to you, and what your defence position looks like. No surprises.