Personal Liability for Director Penalty Notice

Personal Liability for Director Penalty Notice

Personal Liability under a DPN means the company’s tax debt also becomes the director’s personal debt. It is no longer just a just a company obligation. Liability arises simply because the person was a director at the relevant time and the company failed to meet its reporting and/or payment obligations.

Once personal liability applies:

• The company structure no longer shields the director.
• Resignation as a director does not remove the liability.

Multiple directors will be made jointly and severally liable, meaning the ATO may recover the full amount from any of the directors.

How personal liability arises

Personal liability generally arises when a company fails to:

• lodge and pay PAYG withholding,
• lodge and pay Superannuation
• lodge and pay GST, or
• meet reporting deadlines that prevent remission of the penalty.

In lockdown scenarios, liability becomes fixed and cannot be avoided by placing the company into administration or liquidation after the fact.

How the ATO enforces personal liability

Once a DPN is issued and the penalty is not remitted or successfully defended, the ATO may take enforcement action against the director personally. This include:

commencing legal proceedings to obtain court judgements

• issuing garnishee notices against bank accounts or wages, and
• pursuing bankruptcy in serious cases.

Importantly, the ATO does not need to exhaust recovery options against the company before pursuing the director.

Personal liability in practice

In practice, enforcement often depends on factors such as:

• The size of debt.
• The director’s compliance history
• Whether the director engages early with the ATO

Some directors may receive extended time to respond, while others may face rapid escalation. Hybrid DPNs can further complicate enforcement and exposure. Therefore, managing risk and protecting personal assets by seeking advice is as early as possible is highly recommended to understand whether liability has crystallised and what enforcement steps may follow.

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 Personal Liability for Director Penalty Notice, however, every company’s exact circumstances are different. We strongly encourage directors concerned about being held personally liable for company tax debts under a Director Penalty Notice to give an insolvency professional likeDissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.