SBR may help if a company director receives a Director Penalty Notice, but it is not a guaranteed solution. While SBR can address the company’s underlying tax debt, it does not automatically remove personal liability. Whether it helps depends on the type of DPN, the company’s eligibility and how quickly directors act.
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On This Page
- Introduction
- What Is a Director Penalty Notice?
- Lockdown vs Non-Lockdown DPN
- First 21 Days
- Can SBR Help?
- When SBR Can Help
- The First 24 Hours
- Summary: Act Quickly
- FAQs
Introduction
Receiving a Director Penalty Notice (DPN) from the Australian Taxation Office (ATO) can be overwhelming.
Many directors assume that once a DPN arrives, they have no option but to pay the debt personally. In reality, the position is often more nuanced. Depending on the type of DPN and how quickly you act, Small Business Restructuring (SBR) may still help address the company’s underlying tax debt and provide a pathway for the business to continue trading.
However, SBR is not a solution for every DPN. It does not automatically remove a director’s personal liability, and strict time limits may apply.
This guide explains when Small Business Restructuring may help after receiving a DPN, what it cannot do, and the immediate steps directors should take.
What Is a Director Penalty Notice?
A Director Penalty Notice (DPN) is a formal notice issued by the ATO that can make a company director personally liable for certain unpaid company tax debts.
These debts commonly include:
- PAYG withholding,
- GST, and
- Superannuation Guarantee Charge (SGC) liabilities.
The purpose of a DPN is to encourage directors to address outstanding tax obligations before the debt becomes unrecoverable.
Receiving a DPN does not necessarily mean there are no options available. However, it is a clear indication that urgent action is required.
For a detailed explanation of how Director Penalty Notices work, see: What Are Director Penalty Notices (DPNs)?
Lockdown vs Non-Lockdown DPN
Not all Director Penalty Notices have the same legal consequences.
The first step after receiving a DPN is to determine whether it is a lockdown DPN or a non-lockdown DPN, as this can significantly affect the options available to directors.
| Non-Lockdown DPN | Lockdown DPN |
| Usually arises where tax lodgements were made on time, but the debt remains unpaid. | Usually arises where required tax lodgements were not made within the required timeframe. |
| Directors may still have options to manage or remit personal liability if they act promptly. | Personal liability has generally already crystallised and cannot usually be remitted through SBR or voluntary administration. |
| Immediate action is critical. Call 1300 400 373 Now. | Immediate action is equally critical. Call 1300 400 373 Now. |
Although both types of DPN require urgent attention, the available restructuring options can be very different.
First 21 Days
For directors who receive a non-lockdown DPN, the first 21 days are often the most important.
This period may determine whether certain options remain available to deal with the company’s financial position and potentially reduce the director’s personal exposure.
Waiting until the deadline has almost expired can significantly limit those options.
As soon as a DPN is received, directors should:
- Confirm whether it is a lockdown or non-lockdown DPN,
- Record the date the notice was issued,
- Gather the company’s ATO correspondence and financial records,
- Review whether the company may be eligible for Small Business Restructuring, and
- Obtain professional advice immediately.
If you have received a DPN, don’t wait until the final few days to seek help. Call 1300 400 373 now.
Can SBR Help?
Potentially, yes.
If the company is eligible, Small Business Restructuring may help address the underlying tax debt that led to the Director Penalty Notice in the first place.
Through SBR, the company may be able to propose a formal repayment plan to its creditors, including the ATO, while continuing to trade.
However, directors should understand what SBR can and cannot do.
Small Business Restructuring may help by:
- Restructuring the company’s eligible debts,
- Addressing significant ATO debt through a formal repayment proposal,
- Allowing the business to continue operating while the proposal is considered, and
- Providing a pathway to improve the company’s long-term financial position.
Small Business Restructuring does not:
- Automatically cancel a Director Penalty Notice,
- Automatically remove a director’s personal liability,
- Guarantee that creditors will approve the restructuring plan, or
- Reverse ATO recovery action that has already occurred.
Whether SBR is an appropriate option will depend on the company’s circumstances, the type of DPN issued and how quickly directors act.
When SBR Can Help
While every situation is different, Small Business Restructuring is generally most effective when directors act early.
The process may be appropriate where:
- The business remains commercially viable,
- The company satisfies the SBR eligibility requirements,
- Tax lodgements have been completed or can be brought up to date,
- The company has manageable debt levels within the SBR eligibility threshold, and
- Directors seek advice before ATO recovery action progresses further.
The earlier a restructuring practitioner becomes involved, the greater the opportunity to assess the company’s options and prepare a restructuring proposal for creditors.
Waiting until court proceedings have commenced or recovery action has escalated may reduce the restructuring options available.
The First 24 Hours
If you’ve just received a Director Penalty Notice, taking the right steps immediately can make a significant difference.
A practical first-day checklist includes:
- Determine whether the DPN is a lockdown or non-lockdown notice.
- Record the issue date and calculate any important deadlines.
- Gather all ATO correspondence relating to the debt.
- Review whether outstanding tax lodgements need to be completed.
- Assess whether the company may be eligible for Small Business Restructuring.
- Prepare an up-to-date list of the company’s creditors and liabilities.
- Contact a Small Business Restructuring Practitioner or adviser without delay.
Even if you are unsure whether SBR is the right solution, obtaining advice within the first 24 hours can help you understand the options that may still be available before critical deadlines expire.
Summary: Act Quickly
Receiving a Director Penalty Notice does not necessarily mean your company has run out of options.
If the business is eligible, Small Business Restructuring may help address the company’s underlying tax debt and provide a pathway to continue trading. However, it does not automatically remove a director’s personal liability, and the type of DPN issued can significantly affect the options available.
The most important factor is timing. Acting quickly, understanding whether the DPN is a lockdown or non-lockdown notice, and obtaining professional advice as early as possible can help preserve restructuring options before ATO recovery action progresses further.
If you’ve recently received a Director Penalty Notice, don’t wait until the deadline is about to expire. An early assessment can help determine whether Small Business Restructuring is still available and what steps should be taken next.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, consultation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch or call 1300 400 373 today.
FAQs
Can Small Business Restructuring remove a Director Penalty Notice?
No.
Small Business Restructuring deals with the company’s eligible debts. It does not automatically cancel a Director Penalty Notice or remove a director’s personal liability.
However, if the company is eligible, SBR may still help address the underlying ATO debt and improve the company’s financial position.
Can SBR help after a lockdown DPN?
Potentially, yes—but with important limitations.
A lockdown DPN generally means the director’s personal liability has already crystallised and cannot usually be remitted through Small Business Restructuring.
However, SBR may still help the company restructure its debts and continue trading if it satisfies the eligibility requirements.
What if I only received the DPN yesterday?
Act immediately call 1300 400 373 now.
The earlier you obtain advice, the more options you are likely to have. Start by confirming whether the notice is a lockdown or non-lockdown DPN, gathering the company’s financial information and assessing whether Small Business Restructuring may be available.
Waiting until the deadline is close can significantly reduce your options.
Do I need to appoint an SBR Practitioner within 21 days?
Not necessarily.
The 21-day period is relevant to the consequences of certain non-lockdown DPNs, not to the appointment of a restructuring practitioner itself.
However, if Small Business Restructuring is being considered as part of the company’s response, directors should seek advice as early as possible rather than waiting until the deadline is about to expire.
Can the company still enter SBR after receiving a DPN?
Yes, provided it meets the eligibility requirements.
Receiving a Director Penalty Notice does not automatically prevent a company from entering Small Business Restructuring. Whether SBR is appropriate will depend on the company’s financial position, eligibility and the stage of any ATO recovery action.
Does Small Business Restructuring stop ATO legal action?
Not automatically.
Once a restructuring practitioner is appointed, the company receives certain statutory protections that may affect some forms of creditor enforcement. However, the impact will depend on the type of recovery action and the stage it has reached.
What happens if I ignore a DPN?
Ignoring a Director Penalty Notice can have serious consequences.
Depending on the type of DPN, directors may become personally liable for the company’s unpaid tax debts, while the ATO may continue escalating its recovery action against both the company and, in some circumstances, the directors.
Obtaining advice as soon as possible is generally the best course of action.
Should I pay the ATO before considering SBR?
Not necessarily.
Whether payment, Small Business Restructuring or another solution is appropriate depends on the company’s circumstances and the type of DPN involved.
Directors should obtain professional advice before making significant financial decisions, particularly where multiple restructuring options may still be available.
Can SBR help if the ATO has already started recovery action?
In many cases, yes.
Small Business Restructuring may still be available after the ATO has commenced recovery action, but the options generally become more limited as enforcement progresses.
The earlier directors seek advice, the greater the likelihood that restructuring remains a viable option.
What should I do immediately after receiving a DPN?
Your first priorities should be to:
- Determine whether the DPN is a lockdown or non-lockdown notice,
- Record any important deadlines,
- Gather the company’s financial and ATO records,
- Assess whether the company may be eligible for Small Business Restructuring, and
- Obtain urgent advice from an experienced restructuring adviser.
Quick action won’t guarantee a particular outcome, but it can help preserve options that may no longer be available if action is delayed.
Should I speak to an SBR Practitioner or a DPN adviser?
In cases where you’ve received a DPN during the SBR, both.
A Director Penalty Notice can affect the director personally, while Small Business Restructuring focuses on resolving the company’s financial position.
Where both issues exist, directors often benefit from advice that considers the company’s restructuring options alongside the potential personal liability arising from the DPN. Addressing only one issue may leave important risks unresolved.
