More than 84,000 director penalty notices were issued in 2024–25 to directors of about 64,000 companies, representing a 136% increase from the previous year.

The increase highlights the growing importance of understanding how director penalty notices work, especially for directors of companies with unpaid PAYG withholding, GST or superannuation guarantee charge liabilities.

For directors, the critical issues are often not only how much the company owes, but also whether required statements were lodged on time and how quickly action is taken after a notice is issued.

What a Director Penalty Notice Does

A director penalty notice, or DPN, is a mechanism that can make a company director personally liable for certain unpaid company tax debts.

The regime can apply to unpaid PAYG withholding, GST and superannuation guarantee charge liabilities.

Once a DPN is issued, the director generally has a limited period to take action before recovery can proceed against them personally.

The notice is sent to the director's registered address, making it important for directors to keep their official details current.

An outdated address can reduce the practical time available to respond.

The 21-Day Window Matters

A director generally has 21 days from the date a DPN is issued to take action under the applicable rules.

Depending on the circumstances, the penalty can potentially be remitted if the company:

  • pays the debt in full;
  • appoints an administrator;
  • appoints a small business restructuring practitioner; or
  • begins winding up.

The available options depend heavily on whether the underlying tax liabilities were reported on time.

This makes the timing of activity statements and other lodgments particularly important.

Why Late Reporting Changes the Outcome

Where PAYG withholding and GST liabilities are reported within three months of the due date, a director can generally retain a broader range of options after receiving a DPN.

Where those liabilities are reported later than that, or not reported at all, the position becomes more restrictive.

In those circumstances, the director may effectively need the underlying company liability to be paid in full to have the penalty remitted.

This is often referred to as a lockdown DPN.

The distinction shows why lodging on time can remain important even where the company does not have enough cash to pay immediately.

Reporting the liability can preserve options that may otherwise disappear.

A Hypothetical Example

Consider a café company that owes $40,000 in PAYG withholding and $25,000 in GST.

The total unpaid liability is $65,000.

If the relevant activity statements were lodged on time but the amounts remained unpaid, a director who later receives a DPN may still have several options available during the 21-day period.

These may include paying the debt, entering administration, appointing a small business restructuring practitioner or beginning a wind-up process.

Now assume the same statements were lodged five months late.

In that case, the broader remission options may no longer be available, leaving full payment of the $65,000 liability as the principal route to removing the personal penalty.

The director's exposure can therefore differ significantly even though the underlying company debt is identical.

New Directors Can Inherit Existing Risk

New directors can also face exposure to liabilities that arose before they joined the board.

A new director generally has a limited period after appointment to ensure that existing qualifying company debts are dealt with.

This may involve payment, administration, restructuring or winding up.

If no action is taken within the relevant period, the new director can potentially become personally liable for earlier company debts.

This makes tax due diligence important when joining the board of a company with an existing operating history.

Directors need to understand not only current liabilities but also whether lodgments and payments from earlier periods are up to date.

Why DPN Activity Has Increased

The sharp increase in DPNs has occurred alongside rising tax debt among small businesses.

Small business collectable tax debt reached about $35.9 billion at 30 June 2025.

PAYG withholding and GST represent significant parts of that debt.

These liabilities are particularly important because they often relate to amounts already withheld from employees or collected from customers but not yet remitted.

Where company debts remain unresolved, directors can face increased personal exposure under the DPN regime.

Interest Makes Unpaid Debt More Expensive

The cost of carrying unpaid tax debt has also increased.

General interest charge can accrue on overdue liabilities and compound the amount outstanding.

For income years starting on or after 1 July 2025, general interest charge and shortfall interest charge are no longer tax deductible in relevant circumstances.

This increases the effective cost of leaving liabilities unpaid.

For directors, the combination of growing interest, company debt and potential personal liability can make early intervention especially important.

Unpaid Super Can Also Trigger DPN Risk

The DPN regime also extends to unpaid superannuation guarantee charge.

This has become more significant since Payday Super began on 1 July 2026.

Under the new regime, super guarantee contributions generally need to reach employees' super funds within seven business days after payday.

Late payments can trigger a redesigned super guarantee charge that includes the unpaid amount, notional earnings and an administrative uplift.

If those liabilities remain unpaid, directors can potentially face personal exposure through the DPN system.

This creates a direct link between payroll compliance and director liability.

Lodging on Time Can Preserve Options

One of the most important practical points is that lodging and paying are not the same thing.

A company may be unable to pay a liability in full, but timely reporting can still preserve a wider set of options.

Late lodgment can narrow those options and increase personal risk for directors.

This is particularly important for PAYG withholding and GST.

Directors therefore need to distinguish between cash-flow problems and reporting failures.

A company can have one without necessarily allowing the other to develop.

Registered Addresses Matter

DPNs are sent to the address recorded for the director.

If that information is outdated, a notice can be missed or discovered late.

Because the 21-day period runs from the issue date rather than the date the director actually reads the notice, an old address can create serious timing problems.

Keeping official director details current is therefore an important administrative safeguard.

Former directors should also ensure their records accurately reflect when they ceased holding office.

What Directors Should Monitor

Directors should keep a close watch on several areas.

These include PAYG withholding liabilities, GST, superannuation guarantee obligations and the timing of all related lodgments.

Directors joining an existing company should also review historical liabilities and confirm whether outstanding amounts have been reported.

Payroll systems should be checked to ensure super obligations are being met under the Payday Super timetable.

Official address details should remain current so that any notices are received promptly.

What to Watch Next

Further data on DPN activity will show whether the 2024–25 increase continues.

Directors should also watch for any changes to debt recovery practices, notice procedures or administrative guidance.

The broader tax debt environment remains important because higher levels of unpaid company tax increase the likelihood that personal recovery mechanisms will continue to be used.

For directors, the practical focus remains on timely reporting, accurate records and prompt action where company tax debt arises.