Help! I’m being pursued for an Expired Director Penalty Notice

Help! I’m being pursued for an Expired Director Penalty Notice

Discovering that a Director Penalty Notice has expired can be alarming for directors. Once the deadline passes, the consequences become more serious and the ATO gains stronger powers to recover the debt personally.

A DPN expires when a director does not take action within the 21- day period after the notice issued. Once expired the director penalty is locked in and the ATO can commence enforcement without further warning.

In 2025, the ATO sent record numbers of Director Penalty Notices, but didn’t do much to follow up the new personal liability. In 2026, we are seeing signs that pursuit is beginning.

What Can Directors Do

Even after expiry, directors may still have options, depending on circumstances.

1. Engage with the ATO immediately

Early engagement with the ATO is critical where liability cannot be avoided. The ATO may consider payment arrangements or staged recovery, depending on the director’s circumstances and level of cooperation.

2. Check whether the DPN is Valid

Not all DPNs are correctly issued. This requires careful review of appointment dates, registration dates, and lodgement history.

3. Consider limited statutory defences

In certain circumstances, a director may still raise a statutory defence such as serious illness or another acceptable reason, or having taken all reasonable steps to ensure compliance. These defences are technical and evidence-based and should be assessed carefully.

4. Consider company insolvency or restructuring

Even if a DPN has expired, directors may still need advice on liquidation or restructuring options for the company, and how those steps interact with the director’s personal DPN liability. Although it will not usually remit the penalty, but it may still be relevant as part of an overall strategy.

5. Consider personal exposure

An expired DPN creates personal liability, not just a company issue. Directors should consider:

• Their personal financial position,
• The risk of enforcement action including bankruptcy, and
• Whether voluntary personal insolvency options may become relevant if the debt cannot be resolved.

6. Advice should address both the company and the director personally, ideally from tax, insolvency and legal advisers.

What Steps Will the ATO take?

The ATO can move into enforcement mode and pursue the director personally once a DPN has expired. This commonly occurs in this order:

1. A series of Demands

The ATO will often begin by issuing a series of demands for payment. These may include reminder letters, warning, request to engage about repayment, offsetting personal tax credits or requests for personal information.

2. Garnishee notice

A Garnishee notice may be issued by the ATO if the debt remains unpaid. This allows the ATO to recover funds directly from the director’s bank account or third party who owe money to the director. A Garnishee notice may impact personal cash flow significantly as this can be issued with little notice.

3. Summons to Court for Judgement

The ATO may commence court proceedings to recover the director penalty as a personal debt. If the proceedings are successful, the court may enter judgement against the director. Once the judgement obtained, the ATO’s recovery options broaden further.

4. Bankruptcy Petition

Under serious circumstances, the ATO may escalate to bankruptcy action. This can involve issuing a bankruptcy notice and eventually filing a creditor’s petition. Bankruptcy is of the ATOs last resort action, it is a risk where large penalties are involved and engagement has not occurred.

Practical tips for directors facing an expired DPN

• Do not ignore it – expiry increases risk, not urgency from the ATO’s side.
• Confirm whether the DPN is lockdown or non-lockdown, as this affects available options.
• Act quickly if garnishee action starts, as funds can be removed without notice.
• Get advice early, especially before negotiating directly with the ATO.

While an expired DPN significantly narrows options, directors who act early and understand their position are often better placed to control outcomes and avoid the most severe enforcement action.

Do you have more questions about our Director Penalty Notices? Read our full guide here.

The Importance of Seeking Professional Advice

This article has aimed to provide general information about being pursued for an expired Director Penalty Notice, however, every company’s exact circumstances are different. We strongly encourage directors who are being pursued by the ATO for an expired Director Penalty Notice and are unsure about their ongoing liability or options to give an insolvency professional like Dissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.