Understanding Director Penalty Notices (DPNs): What You Need to Know

If you are a company director in Australia, it’s crucial to understand the implications of a Director Penalty Notice (DPN). At Gavin Ma & Co Accountants, we help business owners navigate their tax obligations and stay compliant with the ATO, especially when it comes to PAYG withholding and GST reporting.

What is a Lockdown DPN?

A Lockdown DPN is issued by the Australian Taxation Office (ATO) when a company fails to lodge PAYG withholding or GST returns within the required timeframe and has outstanding tax debts.

The only way to remit the penalty under a Lockdown DPN is by paying the debt in full. This type of DPN leaves directors with very limited options, although certain defences such as serious illness or extenuating circumstances may apply.

When Can Director Penalties Be Remitted?

The ability to remit a director penalty depends heavily on how promptly the company reports its tax liabilities. There are two main scenarios:

Liabilities Reported Within 3 Months of the Due Date

If PAYG withholding or net GST is reported within three months of the due date, or within three months of a new director’s appointment, then directors have more options to avoid personal liability.

The penalty can be remitted if the company:

• Pays the tax debt in full
• Appoints an administrator under the Corporations Act 2001
• Appoints a Small Business Restructuring Practitioner
• Begins winding up the company

Liabilities Reported After 3 Months

If the reporting is delayed for more than three months:

• The only option to remit the penalty is paying the debt in full
• Administration or restructuring will not remove the director’s personal liability

Why Timely Lodgement Matters

As a company director, failing to report PAYG or GST obligations on time can lead to personal liability, even if the company is struggling financially. Early action is key. If your company is experiencing financial difficulty, seeking help from a qualified accountant or advisor early can make all the difference.

How Gavin Ma & Co Accountants Can Help

At Gavin Ma & Co, we support Melbourne business owners with:

• Tax compliance and BAS lodgements
• Director risk assessments and ATO negotiations
• Business restructuring and insolvency support
• PAYG & GST reporting for small to medium businesses

Don’t risk receiving a Lockdown DPN. Let us help you stay compliant and protect your personal assets.

Call us today for a confidential consultation.
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