The ATO has made no secret of its intentions. After several years of relative leniency during and after COVID (where businesses were allowed to accumulate tax debts and manage them through payment plans), the ATO has shifted decisively into enforcement mode.
Director Penalty Notices are among the most powerful tools in the ATO’s arsenal, and the number issued has increased significantly. If you are a director of any company, you need to understand this because it directly affects your personal financial position, not just your business.
Why Is the ATO Increasing Its Enforcement Activity?
During the COVID-19 pandemic and its aftermath, the ATO adopted a supportive stance toward businesses under financial pressure. Debts were allowed to accumulate, payment arrangements were extended, and formal enforcement action was largely put on hold. The result was a significant build-up of outstanding tax debt across thousands of Australian businesses.
That period is now firmly behind us. The ATO has publicly committed to returning to active debt collection, and its focus has sharpened considerably. It is now systematically working through that backlog (pursuing outstanding PAYG withholding, unpaid superannuation guarantee obligations, and overdue GST), and Director Penalty Notices are central to that strategy.
The ATO’s position is straightforward: by making directors personally liable for their company’s unpaid tax obligations, it creates an immediate and powerful incentive for action. And it is working. The volume of DPNs being issued has risen sharply, and the ATO has signalled it will continue to prioritise this area.
⚠️ This is not a future risk: it is happening now
The ATO is actively issuing Director Penalty Notices across Australia right now. This is not a warning about something that might happen. If your company has outstanding tax obligations or lodgement backlogs, the risk to your personal assets is real and current.
What Is a Director Penalty Notice?
A Director Penalty Notice (DPN) is a formal notice issued by the ATO to a company director, making them personally liable for certain unpaid company tax obligations. Once a DPN is issued, the ATO can recover the debt directly from the director, including by garnishing personal bank accounts or pursuing personal assets such as your home.
The company debts that can attract a DPN include:
- PAYG withholding: amounts withheld from employee wages that were not remitted to the ATO
- Superannuation Guarantee Charge (SGC): unpaid superannuation obligations, including the charge, interest, and penalties
- GST: in certain circumstances where the company has outstanding net GST liabilities
It is important to understand that the term “director” in this context is broad. It includes:
- Directors of your main operating company
- Directors of trustee companies for family trusts
- Directors of holding companies or investment entities
- Non-executive directors of other companies you may have joined
- Former directors: in certain circumstances, resigning does not remove your liability if a DPN has already been issued
If you hold directorships across multiple entities (which many of our clients do), each one carries its own potential DPN exposure. This is one of the most overlooked risks we see.
Two Types of DPN, and One Is Far More Serious
Not all DPNs are the same. Understanding the difference is critical.
| Non-Lockdown DPN | Lockdown DPN | |
|---|---|---|
| What triggers it? | Company lodged on time but did not pay | Company failed to lodge BAS, IAS or SGC statements by the due date |
| Can personal liability be remitted? | Yes, if you act within 21 days | No; locked in regardless of what happens next |
| Your options | Pay the debt, enter administration, or appoint a liquidator within 21 days | None; liability stands even if the company later pays in full or is wound up |
| Risk level | Serious but manageable if caught early | Severe; this is the one that can cost you your home |
⚠️ The most important thing to understand
It is not just about paying late. If your company has failed to lodge its BAS, IAS or SGC statements on time (even if the amounts owed are small), you are at risk of a lockdown DPN. Once issued, there is no way to remove that personal liability. Lodgement compliance is just as important as payment.
Who Is Most at Risk?
You may be more exposed than you realise. The clients we are most concerned about are those where:
- PAYG withholding or superannuation obligations have been paid late or managed through informal instalment arrangements
- BAS, IAS or SGC statements are behind on lodgement, even by just one or two quarters
- The business has been going through a difficult period, and tax has been deprioritised in favour of keeping other creditors paid
- You are a director of a trustee company for a family trust that has its own tax or super obligations.
- You joined a company as a director without fully reviewing its compliance position at the time.
- You recently resigned as a director; resignation does not automatically remove liability if a DPN has already been issued or the relevant lodgements were already overdue
Personal Services Income
Alongside its increased DPN activity, the ATO has also flagged that it is increasing scrutiny of personal services income (PSI) arrangements, particularly where income earned by an individual through their personal efforts is being retained in a company or trust rather than flowing back to that individual.
With the release of PCG 2025/5 in late 2025, the ATO has given taxpayers until 30 June 2027 to review and adjust higher-risk PSI arrangements. This is relevant for clients who operate through a company or trust and have been retaining profits or splitting income with family members. If this sounds like your situation, please speak to us; there is still time to act.
Protecting Your Personal Assets: What You Should Do
The best form of asset protection is early, open communication. The ATO has far more flexibility to work with businesses before a DPN is issued than after one is issued. Once a lockdown DPN lands, options are limited and time is short. Here is what we recommend:
- Review your company’s lodgement position: ensure all BAS, IAS and SGC statements are up to date
- Check that superannuation guarantee obligations are being paid on time and in full. From 1 July 2026, Payday Super requires contributions to be received by the fund within 7 business days of each payday.
- Review all directorships you hold (not just your main business) and check each entity’s compliance status.
- If your company has outstanding tax debts, speak to us about a formal ATO payment arrangement before enforcement action begins.
- If you are considering resigning from a directorship, speak to us first: timing matters
Please tell us: no concern is too small.
If you have any concern about your business, whether it is an overdue BAS, a super payment that went in late, a tax debt you have been managing informally, or simply a feeling that things are getting on top of you, please get in touch with us. You may think the issue is minor, trivial, or already under control. Please tell us anyway. You may feel embarrassed or uncertain about whether it is worth raising. Please tell us anyway. You may have a directorship in another entity that you have not thought about in years. Please tell us anyway. The earlier we know, the more we can do. Once the ATO issues a DPN, the clock starts immediately, and options narrow fast. We would far rather have an early conversation than be called in to manage a crisis.
We understand that businesses go through difficult periods. Tax debts can accumulate for reasons unrelated to bad intent, and the ATO’s increased enforcement activity does not reflect your character as a business owner. But it is real, it is happening now, and personal assets are genuinely at risk for directors who do not act early. If you have any queries or concerns, please get in touch with our team, and we will be happy to assist.
