Director penalty notice Payment plan

Director Penalty Notice Payment Plan

Receiving a Director Penalty Notice can be stressful, and many directors immediately start looking for ways to manage the company’s tax debt. One option often considered is arranging a payment plan with the Australian Taxation Office (ATO). But does entering into a payment plan actually protect you from personal liability?

A common question directors ask after receiving a Director Penalty Notice (DPN) is whether they can set up a payment plan with the Australian Taxation Office (ATO), and if that is done, will it prevent me from being personally liable. 

The answer is yes and no. The company can go on a payment plan, but it does not remove or prevent director personal liability under a DPN. We have heard of the ATO undertaking to a director that it will “delay enforcing” a DPN if the company taxpayer stays on a payment arrangement, but be wary of this approach. The delayed enforcement is a policy, not a legal agreement, so it could change at any time.

What people mean by a “DPN Payment Plan”

When people refer to a “DPN Payment Plan”, they are usually referring to a way to negotiate with the ATO to pay the debt over time while avoiding personal liability. This was once a listed option to remit a DPN, but it was removed in 2022.

Can you enter a payment plan with the ATO?

It is possible for a company to enter into a payment arrangement with the ATO under the broader tax debt collection rules to manage ongoing tax debts. But under current practice, entering into an ATO payment plan is not a valid way to remit a DPN.

While a payment plan may keep enforcement action on hold for the underlying company tax debt itself, it does not meet the legal remission requirements for a DPN. That means even if the company negotiates to pay off its liabilities over time, the ATO can still treat the director as personally liable under the DPN unless one of the recognised compliance actions is taken.

What options directors do have

If the company lodged its returns on time but didn’t pay, the ATO can issue a Non-Lockdown DPN. Directors generally have 21 days from the issue date to take actions to avoid personal liability. These include:

• Pay the debt in full
• Appoint a voluntary administrator to the company
• Appoint a Small Business Restructuring Practitioner (SBRP)
• Place the company into liquidation

Taking any of these actions within the compliance period can avert personal liability for the director under a non-lockdown DPN. 

In Lockdown DPN circumstances, which arise when lodgements were late or missing, the only way to remit the penalty is to pay the debt in full. Voluntary Administration, SBR or liquidation do not remove the personal liability penalty. This is why lodging on time, even without paying, preserves options.

So, can you still request a Payment Plan?

Yes, but it only helps with cash flow and ATO collection pressure, not with avoiding personal liability under a DPN. A payment plan may stop short-term collection pressure and buy time to assess options, but it does not:

• Remit a Lockdown DPN
• Remit a Non-Lockdown DPN
• Pause the 21-day countdown
• Protect the director personally

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 Director Penalty Notice Payment Plan, however, every company’s exact circumstances are different. We strongly encourage directors seeking to understand payment plan options for a Director Penalty Notice and how to manage ATO debt obligations to give an insolvency professional like Dissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.