Context

Director Penalty Notices (DPNs) are an important compliance tool in the tax system. Where a company does not pay certain tax liabilities on time, including Goods and Services Tax, Pay as You Go withholding and Superannuation Guarantee Charge, directors become personally liable for those amounts through the director penalty regime. DPNs allow the Australian Taxation Office (ATO) to recover those unpaid company tax debts from directors personally, including former directors, for the period of their directorship. They promote director accountability, encourage companies to stay on top of their obligations, and help protect public revenue and employee entitlements.

However, some directors may not fully understand these tax obligations, the personal consequences of failing to meet them, or that late lodgment may significantly limit their options for resolving their personal liability. Early stakeholder feedback also suggests the ATO’s administration of DPNs may not always respond appropriately to taxpayer circumstances. This reinforces the importance of ensuring the regime is administered fairly, proportionately and with appropriate safeguards.

DPNs can have serious consequences for some directors, especially for those who were unable to participate in the management of the company. Some directors may experience circumstances such as vulnerability, coerced directorship or other financial abuse situations, where they may be exposed to personal liability without genuine control or awareness of their directorship. This review will examine how the ATO considers these circumstances when issuing and managing director penalties.

Concerns raised through our complaint investigations also suggest former directors may face difficulties obtaining information from the ATO after receiving a DPN, as they are no longer recognised as the authorised contact.

This review comes at a time where the ATO is increasing and accelerating its use of DPNs, with more than 84,000 notices issued in the 2024-25 financial year, a 136 per cent increase on the previous year. Accordingly, we will consider how cases are selected for a DPN and what follow up happens after a DPN is issued.

The review also builds on our 2025 review into the identification and management of financial abuse within the tax system and aligns with broader government efforts to combat coerced directorships and financial abuse.

Objective

This review will assess whether the ATO’s administration of DPNs is fair, effective and has appropriate safeguards, including within insolvency and restructuring contexts. This includes being responsive to the circumstances of affected directors when administering the director penalty regime, including consideration of statutory defences. We will also have a specific focus on how the ATO identifies and responds to vulnerability-related issues such as coerced directorships. We also aim to identify where improvements may be needed while continuing to protect public revenue and employee entitlements.

Approach

This review will draw insights from our complaint investigations, stakeholder engagements including with the tax professional bodies and financial counsellors and relevant ATO materials, data and processes.

We will engage with key stakeholders and the community throughout the review to understand experiences, test emerging insights, and inform our findings and recommendations.

Scope

This review will examine whether, before, during and after issuing a DPN:

1. The ATO’s communications to current and former directors provide adequate and timely information about their obligations, the director penalty, underlying tax debt and actions that they may take.
2. The ATO appropriately and consistently considers the circumstances of the affected directors, including during the recovery of the debt.
3. The ATO appropriately and consistently considers and responds to factors such as vulnerability, coercive directorship and financial abuse.

The following areas are outside the scope of this review:

• other aspects of financial abuse in the tax system beyond issues relevant to DPN administration
• the ATO’s broader debt collection practices, except where needed to understand the ATO’s administration of DPNs
• wider corporations law, insolvency and small business restructuring settings, except where necessary to understand the operation and administration of the DPN regime

Deliverable

The final report is expected to be delivered in April 2027.

Call for input and contribution

We welcome contributions from interested parties about their experiences and insights on:

• the ATO’s consideration of individual taxpayer circumstances before issuing a DPN or when managing a DPN defence
• receiving and understanding ATO letters or other communications about DPN liabilities, including what was helpful and what could have been clearer or handled better
• raising defences and providing details of vulnerability, coercion or financial abuse in response to DPN action, including what was handled well and what could have been handled better
• the consistency of the ATO’s treatment of directors where a company has more than one director
• how DPN action affects small businesses, former directors and directors associated with companies while the business is operating, during external administration or post liquidation
• improving the ATO’s systems, safeguards and administrative practices for DPNs.

Input and contributions may be made by:

Email: [email protected]
Survey & Webinars: visit our Review of ATO’s administration of Director Penalty Notices page
Phone: (02) 8239 2123
Post: Tax Ombudsman GPO Box 551 Sydney NSW 2001

The closing date for contributions is 29 September 2026.

Confidentiality

The Tax Ombudsman is collecting information as part of this review. This may include your name, contact details, professional affiliation, and any personal experiences or views you choose to share. Your information is collected to inform the review’s findings, assess systemic issues, and develop recommendations for improving the tax system. Aggregated or de-identified insights may be published in the final report, but individuals will not be identified unless they have expressly waived confidentiality.

Submissions will be analysed by Tax Ombudsman staff, who may also use enterprise-grade artificial intelligence tools to assist with summarisation, thematic analysis, and identification of systemic patterns. Identifiable information will not be published, disclosed to the ATO or any other party unless you consent or have already made the information public (e.g. via your website). Section 37 of the Inspector-General of Taxation Act 2003 protects the confidentiality of information provided to the Tax Ombudsman. Information will also be managed in accordance with recordkeeping and archival requirements under the Archives Act 1983. Information that is subject to legal professional privilege can be included in a submission and doing so will not result in waiver of that privilege.

You may request access to or correction of your personal information by contacting us at [email protected]. For more information about how we handle personal information, please refer to our privacy policy.

10 things to know from our report

1. Registered agents represent around 62% of individual taxpayers and 96% of non-individual taxpayers.
2. Online Services for Agents (OSfA) is a secure digital platform provided by the ATO for registered agents and their authorised staff. The proportion of agents who said OSfA, met all or most of their needs fell from 76% in 2022 to 63% in 2026.
3. Agents and the ATO would prefer to use digital channels that complement business software and reduce the volume of calls.
4. There are limitations of what agents can complete in OSfA which creates inefficiencies and frustration, with agents needing to call the ATO to complete a transaction.
5. In some cases, agents must request information from the ATO that already exists digitally, requiring ATO staff to manually prepare reports that could potentially be provided through self-service.
6. The administrative burden on agents impacts the efficiency and productivity of their practice and can impact client fees – thus increasing the cost of compliance for taxpayers.
7. There are almost 100 OSfA-related changes awaiting action in the ATO backlog of system improvements. Some improvements have sat on the list since before 2022 without progressing.
8. Stand-alone improvements to OSfA often struggle to progress in the ATO’s change program prioritisation unless they become part of a larger ATO project.
9. Practice Mail is a web portal designed as a channel for agents to send requests to the ATO, not to support ongoing two-way communication with agents. It no longer meets the needs of agents who require more immediate two-way communications and broader functionality.
10. Agents expect a quality, modern digital service offer from the ATO – which will minimise the administrative burden and expense for themselves, their clients and the ATO itself.