What happens if you ignore a DPN?

Day 22: what changes

A director penalty exists from the moment the company misses the due date. The notice is the step the ATO must take before it can recover that penalty from you. Once the 21 days pass with none of the remission actions completed, that restriction falls away.

From then on you have two debts running in parallel: the company's liability and your personal director penalty for the same amount. Any payment by the company or by any director reduces both equally. The ATO can choose to pursue the company, you, your co-directors, or all of you at once.

How the ATO recovers a director penalty

• Offsetting. Your personal income tax refunds and credits are applied to the penalty without asking you.
• Garnishee notices. The ATO can issue a garnishee to your bank, your employer or people who owe you money. No court order is needed.
• Legal proceedings. The ATO can sue you personally for the penalty and obtain judgment.
• Bankruptcy. With a judgment in hand, the ATO can issue a bankruptcy notice and petition for your bankruptcy. Our page on whether a DPN leads to bankruptcy explains how far that usually goes.

The ATO does not have to do these in order, and it does not have to do them quickly. Some directors hear nothing for months and assume it has gone away. It has not. Interest keeps accruing on the underlying company debt the whole time.

What you lose by waiting

For non-lockdown amounts, the 21 days are the only window in which appointing an administrator, a restructuring practitioner or a liquidator removes your personal liability. After day 21, those same appointments can still deal with the company's debt, but the penalty stays with you.

Two things survive the deadline. The statutory defences (illness, all reasonable steps, and a reasonably arguable position for SGC) can still be raised, but they are narrow and need evidence. And you can still ask the ATO for a payment plan on the penalty, which does not remit it but usually holds off garnishees and court action while you keep to it.

If the deadline has already passed

It is not over, but the options are different. What usually matters now is:

1. the exact amount of the penalty and how much of it is lockdown;
2. whether the company can pay any of it, since every dollar the company pays comes off your penalty;
3. whether a defence genuinely applies to you;
4. whether a payment plan you can actually keep is realistic, and if not, what personal insolvency advice looks like.

Ignoring the ATO after the deadline follows the same path as ignoring any other tax debt, except that the amounts are often larger and the ATO already has your name.

What to do next

1. Call the ATO on 13 11 42 and confirm the penalty amount and whether recovery action has started.
2. Get the company's lodgement history so you know which amounts are lockdown and which are not.
3. Speak to an adviser about defences, a payment plan on the penalty, and what the company itself can still do.

More questions: 16 Director penalty notice questions questions answered · Full guide: Director penalty notices