Locked-Down vs Non-Locked-Down Director Penalty Notices
The difference is not a matter of wording. It can determine whether formal restructuring or insolvency appointments may remit a director penalty—or whether payment is generally the only remission pathway.
General information only. A Director Penalty Notice is a legal and tax matter. Obtain urgent advice from appropriately qualified legal, tax and insolvency professionals. Finance is subject to assessment, security, valuation and lender criteria.
Lodgment timing can change the available remission pathways.
- Identify each liability and reporting period
- Confirm when the obligation was reported
- Calculate the 21-day period correctly
- Separate legal strategy from funding strategy
What is the difference between a locked-down and non-locked-down DPN?
A Director Penalty Notice, commonly called a DPN, is the formal notice the Australian Taxation Office uses before commencing recovery of certain director penalties. The regime can apply to unpaid pay as you go withholding, goods and services tax and superannuation guarantee charge liabilities.
The labels locked-down and non-locked-down describe the remission pathways that remain available. They do not describe whether the notice is serious; both require immediate professional attention.
More than one potential remission pathway may remain
Depending on the liability and timing, the penalty may be remitted by full payment or, if completed before or within the applicable 21-day period, by appointing an administrator or small business restructuring practitioner, or beginning to wind up the company.
Appointment alone does not remit the penalty
Where the reporting obligation was not met within the required timeframe, the penalty can become locked down. The ATO states that appointment of an administrator, restructuring practitioner or liquidator does not remit a locked-down penalty.
When can a director penalty become locked down?
Current ATO practice guidance states that a lock-down applies where the company:
- fails to notify PAYG withholding or GST liabilities within three months of the due date for lodgment; or
- fails to lodge superannuation guarantee statements by their due date.
For these penalties, appointing an administrator, appointing a small business restructuring practitioner or beginning to wind up the company before or within the 21-day DPN period does not itself remit the director penalty.
What may still remit a locked-down penalty?
The ATO’s table states that full payment remits the penalty. Whether payment should be made, how it should be funded and what other legal consequences may arise must be considered with professional advisers. A loan is not a legal remedy and does not alter the classification of the penalty.
There can also be technical issues concerning estimates, amended liabilities, new directors and available statutory defences. These matters are fact-dependent and should not be treated as a finance-only problem.
What may be available for a non-locked-down DPN?
Where the relevant liabilities were reported within the required timeframe, the penalty may remain non-locked-down. ATO guidance indicates that remission may be available if the company pays the liability in full. Depending on the liability and circumstances, remission may also occur if the company appoints an administrator or small business restructuring practitioner, or begins to be wound up, before or within 21 days of the DPN being issued.
That does not mean one pathway is automatically preferable. Directors need advice about company solvency, creditor interests, tax consequences, personal exposure, business viability and the effect of any proposed transaction.
Confirm lodgments
Match each liability period to the relevant lodgment date and ATO record.
Confirm the deadline
Preserve the notice and envelope and obtain advice on when it was given.
Assess solvency
Review cash flow, arrears, creditor pressure and the company’s ability to pay debts as due.
Compare pathways
Have advisers compare payment, restructuring, administration and winding-up implications.
What should a director do immediately?
- Record receipt details. Keep the notice, envelope and any electronic correspondence. Do not calculate the deadline from the day the notice happened to be opened.
- Engage qualified advisers. Contact a lawyer, tax adviser and, where appropriate, a registered insolvency practitioner who understands DPN matters.
- Reconcile the liabilities. Confirm PAYG withholding, GST and SGC amounts, reporting periods, lodgment dates, payments, credits and any estimates.
- Assess company solvency. ASIC says directors must remain informed about the company’s financial position and prevent insolvent trading.
- Document the proposed pathway. Establish whether the advice points toward payment, a formal restructuring or insolvency process, an objection or defence, or another step.
- Only then test finance. If payment is part of the advised strategy, establish the exact payout, usable property equity, transaction costs and credible repayment exit.
Where might finance fit?
Property-backed commercial finance may potentially provide funds where advisers recommend paying a liability and the borrower has eligible Australian property, a genuine business purpose and a credible repayment strategy. The facility remains subject to lender assessment and must be capable of settling within the real transaction timetable.
First-mortgage refinance
A new commercial facility may refinance existing secured debt and potentially release additional funds, subject to value, serviceability or exit assessment and lender criteria.
Second-mortgage finance
Additional capital may potentially be raised behind an existing first mortgage where there is sufficient equity and all consent, priority and legal requirements can be satisfied.
Additional property security
Another eligible property may potentially support the business-purpose requirement, subject to ownership, existing debt and lender policy.
Short-term bridge
A short-term commercial facility may bridge to an identified sale, refinance or other credible exit. A vague intention to refinance is not enough.
Finance does not change a locked-down penalty into a non-locked-down penalty. Its role is narrower: it may provide a payment source if payment is part of the professionally advised response.
What will a commercial lender usually want to understand?
- The exact requirement: current ATO payout evidence and a clear schedule of other proposed uses.
- The security position: property address, ownership, estimated value, existing mortgages and available equity.
- The business purpose: why the facility is commercial and how funds will be applied.
- The broader position: other arrears, creditor pressure, legal action, caveats and securities affecting settlement.
- The exit: refinance, property sale, asset sale, contracted receivables or another evidence-based repayment event.
- The timetable: valuation, due diligence, documents, priority arrangements and settlement dependencies.
No-document or no-credit-check language should not be interpreted as no assessment. Even where financial reporting requirements are streamlined, a responsible commercial lender will still assess identity, purpose, security, title, liabilities, legal risks and exit.
How the classification can change the decision tree
Situation: A company director receives a DPN covering several PAYG withholding and GST periods. Some liabilities were reported on time and others were reported late.
Professional review: The adviser checks each period rather than treating the notice as one undivided amount. The director is told which penalties may be non-locked-down, which may be locked down and what actions are legally available within the remaining time.
Potential finance role: If payment forms part of the advised strategy, a broker assesses whether eligible property equity could support a business-purpose facility for the verified payout and transaction costs.
Exit: The proposed facility is supported by a defined refinance or asset-sale pathway, not merely an expectation that trading will improve.
This is a hypothetical example, not a completed client transaction or indication of approval.
Locked-down DPN FAQs
Can one DPN include both locked-down and non-locked-down amounts?
Potentially, because a notice may cover different liabilities, reporting periods and lodgment dates. Obtain professional advice and reconcile every component against ATO records.
Does appointing an administrator remove a locked-down penalty?
ATO guidance states that appointing an administrator, small business restructuring practitioner or liquidator does not remit a locked-down director penalty.
Does full payment remit a director penalty?
The ATO’s remission table states that payment in full remits the penalty. The correct payout, source of funds and legal consequences should be confirmed by qualified advisers.
Can a payment plan unlock a DPN?
Do not assume that a payment arrangement changes the classification or remits the penalty. Obtain advice about the precise effect of any arrangement in the circumstances.
Can a new director inherit old company tax liabilities?
The DPN regime contains specific rules for new directors and pre-appointment liabilities. The applicable dates and potential exposure require professional review.
Is property-backed DPN finance guaranteed?
No. Any facility is subject to business purpose, security, valuation, credit, legal due diligence, documents, settlement dependencies and lender criteria.
Further reading
Is payment part of your advised DPN response?
Basic Finance can assess a genuine business-purpose, property-backed requirement. Approval and settlement are not guaranteed and remain subject to lender criteria.