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Director Penalty Notice (DPN) – Another ATO Compliance Crackdown

The Australian Taxation Office (ATO) is turning up the heat on directors, with the number of Director Penalty Notices (DPNs) surging as small business debt surpasses $100 billion as of March 2025. Enforcement through DPNs is occurring at an unprecedented rate – jumping from 26,702 in FY23–24 to more than 84,000 in FY24–25.

For company directors, this means the risks of personal liability for unpaid business tax and super debts have never been greater.

Understanding how DPNs work, why the ATO’s stance has changed, and what you can do to protect yourself is critical. At McKinley Plowman, we’ve already seen firsthand how late lodgements, non-payment, and non-engagement with the ATO can lead to disastrous consequences – including businesses being shut down.

What is a Director Penalty Notice (DPN)?

A Director Penalty Notice is one of the ATO’s most powerful compliance tools. It allows the ATO to make current or former directors personally liable for specific company liabilities, including:

• PAYG withholding
• Net GST (including luxury car tax and wine equalisation tax)
• Superannuation Guarantee Charge (SGC)

If a company fails to lodge or pay on time, the ATO can issue a DPN. Depending on the circumstances, a director may have limited options to avoid payment – such as placing the company into voluntary administration or liquidation within a prescribed period. Once deadlines pass, the liability “locks down,” leaving directors personally responsible.

The Evidence: Why This Matters

The surge in DPNs highlights just how determined the ATO has become:

• 26,702 DPNs were issued in FY23–24, linked to around $4 billion in unpaid liabilities.
• 84,000+ DPNs were issued in FY24–25, tripling the previous year’s figure.
• Between July 2024 and March 2025 alone, 59,320 DPNs were served to approximately 44,000 companies, chasing $3.9 billion in debt.
• The ATO’s total “debt book” now exceeds $100 billion, most of which is considered collectible.

This shows the ATO is no longer tolerating late lodgements or outstanding debts.

Why the ATO’s Approach Has Shifted

Several factors are driving this tougher stance:

1. Pandemic-era leniency has ended – the ATO is winding back the support measures that kept businesses afloat.
2. Debt levels have ballooned – delayed payments and deferrals left small businesses deep in arrears.
3. Policy and mandate shifts – government pressure is pushing the ATO to enforce stricter compliance.
4. Economic conditions – inflation, cashflow pressures, and rising costs have increased arrears risk.
5. Compliance culture reset – the ATO wants to reinforce that lodging and paying on time is not optional.

Combined, these drivers have created an environment where directors must be proactive to avoid personal risk.

Risks and Impacts for Directors

The implications for directors are serious:

• Greater likelihood of being personally liable for business tax and super debts.
• Shorter timeframes to respond, limiting options for remission.
• Old debts once thought unenforceable are being revived.
• Stricter scrutiny of payment plans and hardship arrangements.
• Higher risk of insolvency or wind-up for businesses unable to meet obligations.

For directors, ignoring the issue is no longer viable.

What You Can Do to Stay Protected

Directors should act early to avoid being caught out by the ATO’s harsher stance:

• Stay on top of lodgements: Submit BAS, GST, PAYG, and super returns on time – even if payment isn’t immediately possible.
• Engage early: Don’t ignore letters or notices. Work with MP+ and the ATO to negotiate realistic payment plans.
• Maintain accurate records: Keep ASIC details current to ensure you don’t miss critical communications.
• Know your risk: Understand that even former directors can be liable in certain circumstances.
• Seek advice quickly: Professional guidance can mean the difference between regaining control or facing personal liability.

Conclusion

The ATO has made its intentions clear – stronger enforcement, tougher penalties, and less tolerance for non-compliance. For directors, the consequences of inaction are severe: personal liability, forced wind-ups, and lasting financial damage.

At McKinley Plowman, our CFO2GO team is here to help you stay compliant, manage tax debt proactively, and engage constructively with the ATO. Don’t wait until a Director Penalty Notice lands on your desk. Speak to us today about protecting your business and your personal finances. You can reach us on (08) 9301 2200 or visit www.mckinleyplowman.com.au/contact-us.

written by:

Megan George