WHAT AN EXPIRED DPN MEANS – AND WHAT CHANGES AFTER EXPIRY MEANS 

What an expired DPN means – and what changes after expiry means

An expired Director Penalty Notice (DPN) refers to a situation where either a Lockdown DPN has been issued or the 21-day response period set out in the notice has passed and no effective action was taken.

As outlined in our general Director Penalty Notice guide, the ATO issues a DPN to make company directors personally liable for certain unpaid tax debts, including PAYG withholding and Superannuation Guarantee Charge. A standard (non-lockdown) DPN gives directors 21 days from the date of issue to take specific actions.  Or, in some cases, the ATO issues a Lockdown DPN which makes directors instantly personally liable.

What changes after a DPN expires

After expiry:

• Personal liability crystallises – the director becomes personally liable for the penalty amount.
• Remission options narrow – actions that may have avoided personal liability before expiry are no longer available.
• The ATO can pursue the director directly, regardless of the company position.

This shift is critical, because before expiry, the focus for a director is on preventing personal liability. After expiry, the focus moves to managing and resolving the new personal debt.

When does the 21-day period start?

The 21-day period does not necessarily start when a director opens or reads the notice. Under the applicable legislation, a DPN is generally taken to be given when it is posted or left at the relevant address. A director who discovers the notice after the date it was given may therefore have less time than expected, or may already be outside the response period. The notice and relevant dates should be checked promptly.

Lockdown vs non-lockdown DPNs

Not all expired DPNs operate in the same way.

• Non-lockdown DPNs: these apply where the relevant tax obligations were lodged on time but not paid. The 21-day window is the director’s opportunity to avoid personal liability. Once expired, that opportunity is lost.
• Lockdown DPNs: these arises where returns (such as BAS or SGC statements) were not lodged within the required timeframes. In these cases, personal liability generally applies regardless of any action taken after issue, meaning expiry simply confirms an already locked-in position.

Because the consequences differ, identifying the type of DPN is a crucial first step when dealing with an expired notice.

Can one DPN include both types of penalty?

Yes. And they often do. A single DPN may include both lockdown and non-lockdown penalties where different liabilities or reporting periods have different lodgement histories.

For example, a company may have lodged some BAS within the required timeframe but lodged other statements late. If the corresponding liabilities remain unpaid, the same notice may include amounts with different remission consequences.

How to check your DPN

Start by reviewing the schedule attached to your DPN. It may identify the relevant tax periods, amounts owing and lodgement history for each liability.

The distinction between lockdown and non-lockdown penalties is important because the options for remitting the penalty can differ. A single DPN may cover both types, meaning the position needs to be assessed for each liability rather than treating the notice as a whole.

Check when each relevant BAS, IAS or other required notification was lodged against the applicable reporting deadline, and reconcile this information with the amounts outstanding and any payments made. Do not assume that all penalties qualify for remission simply because some liabilities were reported on time. Equally, the presence of lockdown penalties does not necessarily mean that every liability covered by the DPN has the same status.

What happens after a DPN is issued?

A Director Penalty Notice (DPN) can have consequences long after it is first issued. Even if the ATO does not immediately seek payment, the director’s personal liability may remain outstanding. Understanding what happens next can help explain why some directors are contacted about a DPN years after it was issued.

From DPN Expiry to Payment Demand

A DPN generally gives a director 21 days to take the required action to remit a non-lockdown penalty. Lockdown penalties are different because they generally cannot be remitted by placing the company into administration or liquidation after the DPN is issued.

Once the penalty becomes recoverable, the liability may appear on the director’s personal ATO online account. However, the ATO does not always immediately pursue payment. In some cases, the liability may remain outstanding for years without the director receiving a request for payment.

This does not mean the debt has been waived or forgotten. The ATO may still seek to recover it at a later date. If the director becomes entitled to a tax refund or credit in the meantime, the ATO may apply that amount against the outstanding director penalty rather than pay it to the director.

The ATO may eventually contact the director to request payment of the outstanding amount, even if the DPN was issued years earlier. The timing varies between cases, so directors should not assume that a lack of recent contact means the matter has gone away.

What happens if the ATO is not paid?

If the director does not pay the amount sought, the ATO may escalate its recovery efforts. This may begin with a request for payment, followed by a more formal demand for payment. If the debt remains unresolved, the ATO may pursue further recovery action, including garnishee notices or legal proceedings.

Depending on the circumstances, the ATO may take court action to recover the debt and may ultimately apply for a bankruptcy order against the director if the relevant legal requirements are met. These steps are not automatic, and the exact process will depend on the circumstances of the case.

If you have an expired DPN, it is important to understand your personal liability and consider your options before recovery action escalates.

What can the ATO do after a DPN expires?

If a director penalty has expired, the ATO may take recovery action against the director personally. The available recovery options include:

Garnishee notices

The ATO may issue a garnishee notice to a bank or another third party that holds money for, or owes money to, the director. The notice may require that money to be paid directly to the ATO towards the outstanding debt

Recovery from bank accounts or other amounts owed to the director

The ATO may seek to recover the outstanding penalty from funds held in the director’s bank accounts or amounts owed to the director, including through garnishee notices.

Legal recovery proceedings

The ATO may commence legal proceedings to recover an unpaid director penalty once it is legally able to do so. Court documents and formal recovery correspondence should not be ignored, as response deadlines and costs may follow.

Offsets against relevant credits or refunds

The ATO may apply eligible tax credits or refunds against the director penalty, reducing the amount outstanding.

Potential bankruptcy proceedings in more serious cases

In more serious cases, the ATO may pursue bankruptcy proceedings against the director if the relevant legal requirements are met. Bankruptcy does not occur automatically because a DPN has expired.

What can Directors do after a DPN has expired

Although an expired DPN significantly limits options, it does not mean the situation is hopeless. Directors may still have pathways to manage the debt and limit further consequences, depending on their circumstances.

1. Engage with the ATO immediately

Even after expiry, early engagement with the ATO is critical. Directors may be able to:

• Confirm the accuracy of the penalty amount
• Discuss a payment plan
• Clarify how recovery action may proceed

Ignoring an expired DPN increases the likelihood of enforcement action.

2. Review the validity of the DPN

An expired DPN may still be challenged if:

• The notice was not issued correctly
• The director was not acting as a director during the relevant period

This requires careful review of appointment dates, registration dates, and lodgement history.

3. Consider limited statutory defences

In certain circumstances, directors may rely on statutory defences, such as:

• Serious illness or another valid reason preventing participation in management
• Evidence that all reasonable steps were taken to ensure compliance

These defences are narrow and fact-specific, but they remain relevant even after expiry.

4. Explore payment or settlement

Where liability applies, director may still be able to:

• Enter into a personal payment plan
• Negotiate repayment terms based on capacity to pay
• Manage the debt in parallel with broader financial restructuring

While these options do not remove liability, they may prevent more severe enforcement measures.

5. Assess insolvency or restructuring options

If the company is insolvent, directors should seek advice on:

• Liquidation or restructuring pathways
• The interaction between company insolvency and personal DPN liability

It is important to note that appointing an external administrator after a DPN has expired will not usually remit the director penalty, but it may still be relevant to the overall strategy.

While company insolvency or restructuring may form part of the broader response, these actions will not usually remove an expired director penalty. Directors should therefore also consider their personal position, as outlined below.

6. Personal Insolvency Considerations

Although a Director Penalty Notice arises from company tax obligations, an expired DPN creates personal exposure for the director. In some cases, directors may need to consider personal insolvency implications, particularly where the penalty cannot be managed through payment arrangements.  Personal insolvency considerations may include:

• Assessing the director’s personal financial position
• Understanding the risks of enforcement action, including bankruptcy proceedings
• Considering whether personal insolvency options may become relevant if the debt cannot be resolved.

Professional advice should therefore address both the company’s position and the director’s personal circumstances. Directors should consider seeking advice.  Professional advice can help directors understand their position, avoid common mistakes, and respond appropriately to the ATO.

If you cannot afford to pay an expired DPN, there may still be options available to help you manage your personal debts. The most appropriate option will depend on your financial position, the amount you owe and your ability to make repayments.

The main options to consider are outlined below.

Formal Payment Arrangements

If you cannot pay the expired DPN in full, you may be able to approach the ATO to discuss a payment arrangement based on your financial circumstances.

A payment arrangement allows you to pay the debt in instalments rather than as a lump sum. The ATO will consider your ability to make the proposed repayments, and you may need to provide financial information to support your request.

Keep in mind that a payment arrangement generally does not reduce the underlying debt. You will still need to meet the agreed repayments, and the ATO may resume recovery action if you default.

This option may be suitable if you can afford to repay the debt over time but cannot pay it all at once.

Read more in our ATO Payment Plan Guide.

Debt Agreements

If you cannot afford to repay all your debts in full, a Debt Agreement may be another option to consider.

A Debt Agreement is a formal arrangement under bankruptcy law that allows an eligible individual to propose paying creditors an amount they can afford. If the proposal is accepted and the agreement is completed, the debts covered by the agreement are generally dealt with under its terms.

However, not everyone qualifies. Eligibility requirements apply, including limits on debts, income and property. A Debt Agreement can also affect your credit and appear on a public register.

Whether this option is appropriate will depend on your circumstances and whether you meet the eligibility requirements.

Read more in our Personal Debt Agreement Guide.

Personal Insolvency Agreements

A Personal Insolvency Agreement (PIA) may be worth considering if your debts are too large for a Debt Agreement or you do not meet its eligibility requirements.

A PIA allows you to put forward a formal proposal to your creditors to resolve your debts. Depending on your circumstances, the proposal may involve a lump-sum payment, instalments over time or the use of assets to help pay creditors.

A trustee is involved in the process, and creditors must accept the proposal in accordance with the applicable legal requirements. There are costs and other consequences to consider, and acceptance is not guaranteed.

A PIA may be an option where you cannot repay your expired DPN and other debts in full but may be able to offer creditors a workable alternative.

Read more in our Personal Insolvency Agreement Guide.

Bankruptcy

If you cannot afford to pay your debts and the other options are unsuitable, bankruptcy may need to be considered.

Bankruptcy is a formal legal process for individuals who cannot pay their debts. You may apply for bankruptcy yourself, or a creditor may apply to the Court if the relevant legal requirements are met.

A trustee administers your bankrupt estate. Depending on your circumstances, some assets may be used to pay creditors, and you may be required to make contributions from your income. Bankruptcy also has significant consequences, including restrictions on acting as a company director, effects on credit and an entry on the National Personal Insolvency Index.

Bankruptcy is not an automatic consequence of an expired DPN, and it should not be treated as the only available option. You should consider the consequences and seek advice before deciding whether it is appropriate.

Read more in our Bankruptcy Guide.

Frequently Asked Questions

Can an Expired DPN Still Be Remitted?

It depends on the type of Director Penalty Notice (DPN), the underlying liabilities and the actions taken within the relevant period. For a non-lockdown DPN, if the director did not take a qualifying action within the 21-day period, the opportunity to remit the penalty through that action is generally lost. Different considerations apply to lockdown DPNs, for which the relevant reporting obligations were not met within the required timeframes. Payment of the underlying company liability may reduce the corresponding director penalty. The notice, payment history and relevant dates should be reviewed before determining whether any options remain available.

Does Company Liquidation Remove an Expired DPN?

Generally, no. Appointing a liquidator after the relevant DPN period has expired does not, by itself, remit a director penalty that has already become payable. However, payment of the underlying company liability may reduce the corresponding penalty. The company’s insolvency position and the director’s personal liability should be assessed separately, as the company entering liquidation does not automatically resolve the director’s personal exposure.

Can I still enter into a payment plan after a DPN has expired?

You can contact the ATO to discuss whether a payment arrangement is available, but approval and terms depend on the circumstances. A payment arrangement does not, by itself, remit the director penalty, and you should not assume that it will automatically stop recovery action. Confirm which liabilities the arrangement covers and whether any recovery action will continue.

Can an expired DPN be challenged?

Expiry does not, by itself, determine whether there is a valid basis to dispute the notice or the amount claimed. Relevant issues may include whether the notice identifies the correct director and liabilities, the relevant dates and amounts, how the notice was given, and whether a statutory defence or other legal issue applies. The available grounds, procedures and time limits depend on the circumstances. If you believe the notice or amount is incorrect, obtain prompt legal or tax advice and have the DPN, ATO account statements, company records and relevant correspondence reviewed.

Can an expired DPN lead to bankruptcy? 

Yes. An unpaid director penalty may lead to further recovery action and, in appropriate circumstances, bankruptcy proceedings. Bankruptcy is not automatic merely because a DPN has expired; the ATO must follow the applicable legal process. Bankruptcy can have significant consequences for a director’s assets, income, credit position and ability to manage a company. If you cannot pay the debt, seek specialist advice promptly about your options and the potential consequences.

Need help understanding an expired DPN?

If the 21-day period has passed, the next step is to understand what the notice covers, what amount remains outstanding and which options may still be available. Tax Debt Solutions can discuss your circumstances and help you understand the issues to consider. The appropriate response depends on the notice, the relevant liabilities and your personal financial position.

This guide provides general information only and is not legal, tax, financial or insolvency advice. The law and its application depend on the facts of each case. Obtain advice from an appropriately qualified professional before acting.