ATO Debt
Can you use a payment plan after receiving a DPN (Director Penalty Notice) in Australia? Learn when to consider small business restructuring (SBR) instead.
Can you use a payment plan after receiving a DPN (Director Penalty Notice) in Australia? Learn when to consider small business restructuring (SBR) instead.
A Director Penalty Notice (DPN) can quickly turn company tax debt into a personal responsibility for you as a director. If your company cannot pay the full amount, seeking a payment plan from the ATO might seem like the best option to manage cash flow. However, this strategy won’t usually remove your personal liability.
TLDR: You can often ask the ATO for a payment plan after a Director Penalty Notice has been issued. But a payment plan does not usually cancel the DPN. If ATO debt is preventing your business from recovering, it may be worth considering Small Business Restructuring before your debt grows.
A Director Penalty Notice is issued when company tax debts remain unpaid, commonly PAYG withholding, GST or super guarantee charge.
The main concern for recipients is personal liability. The debt is no longer just the company’s problem; the ATO can try to recover it from you personally.
A non-lockdown DPN usually gives you 21 days to take action. A lockdown DPN is more serious because your personal liability is already set, often due to late lodgements.
A payment plan can help if your company can make the instalments and keep up with future tax payments.
A payment plan might help your company manage repayments, but it usually does not cancel the DPN or remove your personal liability as a director.
If the company later misses payments under the plan, the ATO can still pursue you personally and does not have to send another 21-day notice.
Pursuing a payment plan after a DPN may not help if your business is already behind on super, wages, suppliers, or current BAS obligations.
For example, if a family-owned café gets a DPN after a tough few months, the director might agree to a payment plan. But with rent, wages, BAS, and suppliers to pay, there may be no spare cash. The real problem is not just the DPN, but deeper cash flow and debt issues.
Small Business Restructuring (SBR) might suit a company that is still viable but struggling to recover because of old debt.
Through small business restructuring, eligible companies can propose a formal plan to creditors while directors stay in control of day-to-day trading.
Read more: Director Penalty Notices: When to Consider an SBR
SBR is often more effective when considered before a payment plan becomes unmanageable and before creditor action limits your options.
It’s worth exploring if the company has a future, but needs a structured way to deal with existing ATO debt.
If the company is not eligible for SBR, voluntary administration or liquidation may need to be considered instead.
A DPN does not mean the business is finished, but your next decision matters. A payment plan may ease short-term pressure, but it may not protect you personally or solve the company’s deeper debt position.
Before agreeing to a plan you may struggle to maintain, get some advice. mySBR helps directors assess whether Small Business Restructuring is available and commercially realistic.
When you receive a DPN, the pressure can be overwhelming, and your options can seem limited. Check your eligibility today to see whether Small Business Restructuring could help your company move forward through a structured plan.
Not ready to take the next step just yet? Subscribe to the SALEA Advisory mailing list for the latest updates on Small Business Restructuring, helpful resources, and news to support your business through financial challenges.
Take the first step toward a stronger future for your company. Contact us today.
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