A resourcing shift in the ATO? DPNs issued in error finally being rectified
Over the past 18 months, we have witnessed the ATO increasingly issuing director penalty notices (DPNs). More than 84,000 DPNs were issued in FY24-25, up from 26,702 DPNs issued in FY23-24.[1] The ATO’s collectible debt blew out to over $50 billion in mid-2024, and, as made clear in the ATO’s corporate plan for 2025-2026,[2] the ATO is keen to bring that down.
The corporate plan also highlights that increasingly the ATO’s debt collection processes are being automated. This may help explain the rise in directors being issued DPNs in error. Unfortunately, while it may appear in the ATO’s system that a director penalty has arisen due to non-payment or non-lodgement by a reporting date, those systems have not always cross-referenced against whether the company was placed into external administration prior to that date, which means no penalty arose.
Automation may also explain why there are little case management resources within the ATO to consider and revoke DPNs issued in error.
Under the taxation legislation, directors are generally liable for a penalty if, at the end of the due day for reporting and payment of the relevant tax obligation,[3] the tax remains unpaid, and the directors of the company are still under an obligation to ensure the company meets its taxation obligations. The ATO can sue the director for the penalty once a DPN is issued and expires without the director taking one of the actions set out in the notice.
We’ve seen a number of DPNs which claimed director penalties for periods where the relevant company was put into external administration before the due day for reporting and payment of the relevant tax obligations; meaning the directors were no longer under an obligation to ensure compliance with its taxation obligations on the due day.[4] In such cases, no director penalty liability arises.
Despite the clear error, removing these incorrect DPN liabilities from directors’ ATO portals has proven difficult. In some cases, the incorrect liabilities remained for over 12 months after the error was first brought to the ATO’s attention by correspondence (with multiple follow ups issued in the interim). During that time, the DPN liabilities sat on directors’ ATO accounts, often resulting in their personal tax refunds being applied to the liability, even though the liability did not exist at law.
Promisingly, we are starting to see DPNs issued in error being revoked, and the ATO reinstating tax refunds where they were wrongly applied to non-existent penalties.
Spotting an erroneous DPN and how to deal with it
Scrutinise the dates and liability periods stated in the DPN:
- Was the relevant company placed into external administration before the ‘due day’ for the relevant taxation reporting and payment obligation, in which case no director penalty can arise? That is:
- for superannuation obligations, the due date for lodgement of the superannuation guarantee charge (SGC) statement (28 days after the end of the relevant quarter); and
- for PAYG withholding and GST, the due date for lodgement of the business activity statement (BAS) or instalment activity statements (IAS).
- Where a penalty has arisen, but is not ‘locked down’, was the company placed into external administration before the date of the DPN? If so, the director penalty was remitted before the DPN was issued.[5]
Request a call reference number at the end of every ATO call:
- Ask for a call reference number at the conclusion of each call with the ATO. Quote the number in subsequent calls so the ATO staff member can review previous call notes. This will save you time rehashing the background of the matter and your previous communications with the ATO.
Authorise your representative early:
- If you want someone to assist you by dealing with the ATO, such as a lawyer, add them as an ATO authorised representative. The ATO will not discuss taxation matters with third parties unless they have been formally nominated by the relevant taxpayer. You can nominate an authorised representative by calling the ATO or completing and posting a nomination form. Often when it comes to dealing with DPNs, time is of the essence. Given it may take a few days for nominations to be processed, directors should ensure their authorised representatives are nominated pre-emptively, or as soon as possible upon receiving a DPN.
We have recently helped several directors successfully challenge incorrectly issued DPNs – including have improperly applied tax refunds reinstated.
If you require assistance, please contact our team.
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[1] As advised by ATO Deputy Commissioner Anna Longley in her address to the Tax Institute’s annual summit in Sydney on 5 September 2025.
[2] ATO corporate plan 2025–26 | Australian Taxation Office.
[3] Being PAYG, super, GST (including Luxury Car Tax and Wine Equalisation Tax).
[4] See section 269-15(2) of Schedule 1 of the Taxation Administration Act 1953 (Cth).
[5] See section 269-30(1) of Schedule 1 of the Taxation Administration Act 1953 (Cth).