What is the difference between a lockdown DPN and a non-lockdown DPN?

A non-lockdown DPN applies when the relevant obligations have been lodged but not paid. In this case, you have three options within 21 days: pay the debt in full, have the company appoint an administrator, or have the company go into liquidation. A lockdown DPN applies when the obligations were never lodged by the due date. In a lockdown situation, your only option is to pay — you cannot appoint an administrator or liquidator to escape the personal liability. This is why lodgement is so critical, even if you can't pay.

How long do you have to respond to a DPN?

21 days from the date the DPN is issued. The ATO sends DPNs by post to the director's address as registered with ASIC — not necessarily your current address. This is why keeping your ASIC registered address current matters. If the 21-day window passes without action, the ATO can pursue you personally through debt recovery, including garnishee orders and legal action.

Can multiple directors all receive the same DPN?

Yes. All current directors of a company can be issued DPNs for the same debt. Joint and several liability applies — meaning the ATO can pursue any or all directors for the full amount. If one director pays, the others are released from that portion, but the ATO is not limited to pursuing only one director. Former directors can also be caught if they resigned less than 30 days before the due lodgement date.

How does clean lodgement protect directors from DPNs?

Lodging BAS and SGC statements on time — even if you cannot pay — keeps you in non-lockdown DPN territory if the ATO does eventually issue a notice. That gives you options: appoint an administrator or liquidator, or enter a payment arrangement. If you stop lodging and the debt remains unlodged past the due date, you fall into lockdown DPN territory where paying in full is the only out. Maintaining lodgement compliance is the most effective protection a director has.

Director Penalty Notice Australia — What It Is and What to Do

Published May 2025By True Tally Bookkeeping7 min read

What Is a Director Penalty Notice?

A Director Penalty Notice (DPN) is a formal notice issued by the ATO that makes a company director personally liable for the company's unpaid PAYG withholding and Superannuation Guarantee Charge (SGC).

This is one of the ATO's most powerful debt recovery tools. It cuts through the corporate structure — your company's limited liability does not protect you from a DPN. Your personal assets, your home, your savings — all are at risk once a DPN is in play.

The ATO introduced DPN rules to address businesses that withheld PAYG from employee wages (money that was never theirs) or failed to pay compulsory super, and then simply wound up the company to escape the debt. DPNs make that strategy unworkable by holding directors personally responsible.

The Two Types of DPN — and Why the Difference Is Everything

There are two categories of DPN, and which one you receive determines what you can do about it.

Non-Lockdown DPN

A non-lockdown DPN is issued when the company has lodged the relevant returns (BAS or SGC statements) but has not paid. Because the ATO can see the debt on the system, they know exactly what's owed.

With a non-lockdown DPN, directors have three options within the 21-day window:

Pay the debt in full (or have the company pay it)
Appoint a voluntary administrator to the company
Put the company into liquidation

Appointing an administrator or liquidator releases the director from the DPN liability — though it obviously ends the business or hands control to the administrator. This is a genuine escape route, but only available when the obligations were lodged on time.

Lockdown DPN

A lockdown DPN is issued when the company has not lodged the relevant returns by the due date. The ATO doesn't know the exact debt, but they have enough information to issue the notice.

With a lockdown DPN, you have one option: pay in full. The administrator and liquidator routes are not available. Personal liability is locked in at the date the return should have been lodged, and appointing an administrator after the fact does not help.

        The critical insight: Lodging on time — even if you cannot pay — keeps you in non-lockdown territory. It preserves your options. Not lodging destroys them. This is why keeping lodgements current is the single most important thing a director can do when the business is under financial pressure.
      

The 21-Day Window

Once a DPN is issued, you have 21 days from the date on the notice to take action. The ATO sends DPNs by post to the director's address registered with ASIC — which may not be your current address if you haven't kept ASIC records updated.

If the 21 days pass without action, the ATO can move immediately into personal debt recovery. This includes:

Garnishee orders against your personal bank accounts
Statutory demands and civil court action
Recovery from your personal assets
Credit reporting in some circumstances

Do not wait. If you receive a DPN — or suspect one is coming — get advice from a registered tax agent or accountant immediately.

When Multiple Directors Are Liable

Every current director of the company at the time the obligation became due can receive a DPN for the same debt. The liability is joint and several — meaning the ATO can pursue any one director for the full amount, not just their proportional share.

If you're a director of a company with other directors, a DPN against one director is potentially a DPN against all of you. Former directors are also caught if they resigned within 30 days before the lodgement due date — resigning just before the debt falls due doesn't provide protection.

How to Respond to a DPN

The right response depends entirely on which type of DPN you've received and the company's financial position:

If the company can pay — pay the debt within 21 days. The DPN is resolved and personal liability is extinguished.
If the company cannot pay (non-lockdown DPN) — appoint a voluntary administrator or liquidator. Get an insolvency practitioner involved immediately. This option has real costs and consequences but does release the DPN liability.
If you have a lockdown DPN — the only option is payment. Explore whether the company can raise funds, whether there are assets to sell, or whether personal funds need to cover the debt. Get legal advice on your options.
If you believe the DPN is incorrect — you can dispute the underlying debt, but the threshold for this is high. The DPN notice itself is not disputed; you dispute the underlying tax assessment through the standard objection process.

How Clean Lodgements Protect Directors

The most effective protection against DPN exposure is maintaining lodgement compliance at all times. When a business hits financial difficulty:

Lodge every BAS and SGC statement on time, regardless of whether you can pay
Set up ATO payment arrangements to manage the underlying debt
Communicate proactively with the ATO through a registered agent
Keep ASIC records current — particularly director addresses

A business behind on both lodgements and payments is in a far worse position than one that has lodged everything but has a managed payment plan in place. The ATO distinguishes between the two, and so do the DPN rules.

True Tally: lodgement compliance for business owners

We keep lodgements on track and work with businesses across Geelong and Victoria to stay ahead of ATO obligations. If you're behind or worried about DPN exposure, book a free call.

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