A Director Penalty Notice (DPN) cannot be placed on hold or paused once issued. However, the ATO may delay enforcement if directors actively engage, negotiate, or demonstrate intent to resolve the debt. Acting within the 21-day window is critical, as liability becomes enforceable and recovery may begin if no action is taken.
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On This Page
- Introduction
- Can a DPN Be Put on Hold?
- Situations Where the ATO May Delay Recovery
- Payment Arrangements and Negotiations
- How Voluntary Administration or Liquidation Affects a DPN
- Risks of Inaction
- Next Steps
- FAQs
Introduction
A Director Penalty Notice is designed to force directors to address unpaid tax debts quickly. Because of this, many people wonder if there is any way to delay or pause the process. While the notice itself usually cannot be suspended, enforcement timing may sometimes change.
This blog explains whether a DPN can be placed on hold and what actions may influence ATO enforcement.
Can a DPN Be Put on Hold?
No. In most cases, a Director Penalty Notice (DPN) cannot be paused or placed on hold after it is issued, however directors may be able to influence how quickly the ATO moves to enforce the debt.
A DPN makes directors personally liable for certain company tax debts, including PAYG withholding, GST, and Superannuation Guarantee Charge (SGC).
Once issued, directors have 21 days to take action that may cancel the penalty. This period is the final chance to act before the ATO begins recovery.
Situations Where the ATO May Delay Recovery
Although liability begins immediately after the notice is issued, the ATO has discretion over when recovery action begins. Directors who actively work toward a solution may receive more time before enforcement begins.
These steps may include garnishee notices, legal action, or bankruptcy proceedings.
Other situations where ATO may delay recovery include:
- Active negotiations with the ATO to resolve the tax debt
- Evidence of an asset sale, such as property being sold to repay the debt
- Appointment of a Small Business Restructuring (SBR) practitioner within the 21-day period
- Applications for serious hardship, where payment would prevent basic living expenses
Note: Serious hardship applications are strictly assessed and rarely approved. They usually apply to personal tax debts rather than company liabilities.
Payment Arrangements and Negotiations
Negotiation with the ATO can help manage a DPN-related debt. However, it requires transparency and realistic repayment proposals.
Payment Plans vs Remittance
A payment plan does not cancel the DPN. Instead, it may prevent the ATO from escalating recovery action. This protection continues only while payments remain up to date.
Financial Disclosure
Negotiating with the ATO usually requires full financial disclosure.
This may include:
- personal financial statements
- asset details
- income and expense information
- a proposed repayment schedule
Demonstrating Good Faith
Making an initial payment toward the debt may demonstrate genuine intent to resolve the issue. This may encourage the ATO to delay enforcement action.
How Voluntary Administration or Liquidation Affects a DPN
For non-lockdown DPNs, insolvency action may remove personal liability. Directors must act within the required timeframe.
The 21-Day Window
If BAS, IAS, or SGC statements were lodged within three months, directors may take certain steps. Appointing a voluntary administrator or liquidator within 21 days may cancel personal liability.
Lockdown DPNs
If returns were not lodged within three months, the penalty becomes a lockdown DPN. In this case, insolvency will not remove the director’s personal liability.
Directors remain personally liable for the debt. This remains true even if the company closes.
Relinquishing Control
Appointing an external administrator shows that directors have relinquished control of the company. The DPN system is designed to force this decision.
Risks of Inaction
If no action occurs within the 21-day period, the ATO may pursue the director personally. Several enforcement tools are available. For example:
Garnishee Notices
The ATO may issue garnishee notices to banks or employers. These notices redirect funds directly to the ATO.
Bankruptcy Proceedings
The ATO may also begin bankruptcy proceedings against the director.
Financial Consequences
Unpaid director penalties may also cause:
- credit damage
- difficulty obtaining finance
- ongoing financial stress
Next Steps
Understanding whether a Director Penalty Notice (DPN) can be placed on hold is crucial. For company directors, the next step is to:
- Confirm the type of Director Penalty Notice issued (lockdown or non-lockdown)
- Calculate the exact 21-day response deadline from the date on the notice
- Review the company’s BAS, IAS, and SGC lodgement history
- Determine whether voluntary administration or liquidation options are still available
- Assess whether the company can repay or negotiate the tax debt with the ATO
Taking action quickly is critical. Prompt steps may help avoid enforcement action and limit personal liability.
Seeking professional legal or insolvency advice at this stage can help clarify your position. It can also help determine the most appropriate strategy for dealing with the company’s tax obligations before recovery action begins.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, 10-minute conversation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Can the ATO withdraw a Director Penalty Notice after it is issued?
Yes, the ATO may withdraw a DPN in limited circumstances, such as when the notice was issued in error or the underlying debt has been cleared.
Does disputing the tax debt automatically stop a Director Penalty Notice?
No. Disputing the debt does not pause the DPN process unless the ATO formally agrees to reconsider enforcement while the dispute is reviewed.
Can a director request additional time from the ATO after receiving a DPN?
Directors may request time to resolve the debt, but the ATO is not required to grant extensions beyond the statutory timeframe.
Can the ATO issue multiple Director Penalty Notices to the same director?
Yes. A director may receive multiple DPNs if the company accumulates additional unpaid tax liabilities over time.
Can a director challenge a DPN in court?
Yes. Directors may challenge a DPN through legal proceedings if they believe the notice was issued incorrectly or a valid defence applies.
What happens if a director moves overseas after receiving a DPN?
Moving overseas does not remove liability, and the ATO may still pursue recovery through legal channels.
Can a company director negotiate directly with the ATO without a lawyer?
Yes. Directors can negotiate directly with the ATO, although professional advice may help structure negotiations more effectively.
Does changing company directors affect an existing DPN?
No. Changing the company’s directors does not cancel an existing Director Penalty Notice already issued to previous directors.
