Lockdown Director Penalty Notice

Lockdown Director Penalty Notice

Not all Director Penalty Notices are the same. Some provide directors with a limited opportunity to avoid personal liability, while others immediately “lock in” the penalty if certain obligations have not been met.

A Lockdown Director Penalty Notice (Lockdown DPN) is a type of Director Penalty Notice issued by the Australian Taxation Office (ATO) that makes company directors personally liable for certain unpaid company tax debts. The term “Lockdown” is not actually stated in the legislation, but it is the colloquial term that is now widely used.  Lockdown DPNs apply to PAYG withholding, superannuation guarantee charge (SGC), and GST liabilities. Lockdown DPNs arise when a company has failed to lodge its statements within the required timeframes. This failure to lodge means the director has no practical way to avoid personal liability once the penalty is issued.

How is a Lockdown DPN different?

There are two main types of Director Penalty Notices:

1. Non-Lockdown DPN – also called a 21-day DPN, applies when the company has lodged its BAS, IAS or SGC statements on time, but has not paid the associated tax. Directors have 21 days from the date of the notice to take specific actions such as appoint a liquidator or a voluntary administrator to avoid personal liability.
2. Lockdown DPN – applies when the company has failed to lodge its BAS, IAS or SGC statements within the required timeframe. The director’s penalty has been effectively locked down. The 21-day period still appears on the notice, but it does not provide relief through an insolvency appointment. The only way to remit the penalty is to pay the debt in full.
3. Hybrid DPN – is a combination of both Non-Lockdown DPN and Lockdown DPN. It is possible for a company to get the combined notice. These combination notice can be confusing and can trip up directors because of the way the figures are set out. It is important that directors liaise with their advisor to understand what part, if any, becomes a personal liability. If you send us a copy of your notice and we can analyse it for you.

The main difference is that a Lockdown DPN removes most of the director’s options. Lodging late triggers lockdown treatment, even if the company eventually lodges before the notice is issued.

Reporting rules that affect Lockdown treatment

Not all company tax debts have the same reporting window. For DPN purposes:

• PAYG withholding and GST can be reported up to 3 months after the due date and still qualify for non-lockdown treatment.
• Super Guarantee Charge (SGC) must be reported by the due date. If it’s reported late, it is treated as a lockdown amount.

This is why super liabilities often appear as lockdown amounts in DPNs. Many companies miss the SGC statement due date, triggering lockdown sooner than PAYG or GST.

Why does the ATO use Lockdowns DPNs?

The lockdown regime was designed to prevent directors from avoiding accountability by not reporting. The ATO’s position is that reporting and paying are separate obligations. Even if the company cannot pay, the ATO expects BAS, IAS and superannuation statements to be lodged on time. The lockdown mechanism creates a strong incentive for directors to meet reporting deadlines, especially for superannuation. 

In recent years, the ATO has become more active in issuing DPNs, particularly for long overdue lodgements and superannuation non-compliance, reflecting a shift towards enforcement rather than “accommodation”.

What options does a director have?

When a director receives a Lockdown DPN, their options are limited. The only way to avoid personal liability is to pay the debt in full, either by the company if it is still solvent, or by the director personally.

If the company is insolvent, directors can explore restructuring or asset realisation strategies to raise funds, but insolvency appointments themselves do not remit the penalty.

What this means for Directors

• Lodging BAS, IAS and Superannuation returns on time is important, even if the company cannot pay
• A Lockdown DPN is the most serious form of DPN
• Once issued, paying the debt in full is the only path to avoid personal liability
• Non-lodgement is what triggers a lockdown DPN – Lodging on time but not paying triggers a different, and more manageable, DPN

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 Lockdown Director Penalty Notice, however, every company’s exact circumstances are different. We strongly encourage directors who have received or are concerned about a lockdown Director Penalty Notice and its immediate impact on their personal liability to give an insolvency professional likeDissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.