DPN payment plan: does it cancel the director penalty?
No. An ATO payment plan does not cancel a director penalty. A non-lockdown penalty is only remitted if, within 21 days of the notice, the company pays the amount, appoints a voluntary administrator, appoints a small business restructuring practitioner, or begins to be wound up. A payment plan reduces the penalty only as payments are made, and if the plan fails, the ATO can recover the balance from you personally.
Why a payment plan is not enough on its own
- The 21 days keep running. Agreeing a plan does not pause the deadline. Once it passes, administration, restructuring or liquidation no longer remits the penalty for those amounts.
- Your personal liability stays in place. The director penalty equals the unpaid amount. It only falls as the company pays.
- A default exposes you personally. If the company misses payments, the ATO can recover the penalty from you, for example by garnishee notice, by offsetting credits owed to you, or through court proceedings.
- Interest usually keeps accruing. The general interest charge generally continues on the unpaid balance while the plan runs.
What a payment plan can do
A payment plan can still be useful. It spreads the debt over time, it can keep the ATO from taking further action while it is kept, and every payment reduces both the company’s debt and your penalty. It tends to suit a company that is still viable and can meet the instalments as well as its current tax, super and other bills.
The risk is relying on a plan when the company cannot realistically keep to it. If it defaults after the 21 days have passed, the options that would have remitted the penalty may be gone.
Payment plan compared with the options that remit the penalty
| Payment plan | Small business restructuring | Voluntary administration | Liquidation | |
|---|---|---|---|---|
| Remits a non-lockdown DPN if started within 21 days? | No | Yes | Yes | Yes |
| Who controls the company? | Directors | Directors, with a restructuring practitioner | The administrator | The liquidator |
| What happens to the debt? | Repaid in full, plus interest | Creditors vote on a restructuring plan | Creditors decide the company’s future, which may include a deed of company arrangement | The company is wound up |
| Eligibility | At the ATO’s discretion | Conditions apply, including total liabilities and up-to-date lodgements | Open to any company | Open to any company |
Read more about small business restructuring, voluntary administration and how to choose between them.
Lockdown amounts and payment plans
For lockdown amounts, only payment in full remits the penalty, so a payment plan is one way of reaching that point. You remain personally liable for the balance until the last instalment is paid, and a formal appointment will not change that.
Received a DPN? The 21 days are already running.
Work out your deadline with our 21-day DPN calculator, or book a free 30-minute call with Luke D’Costa, Senior Manager – Debt Strategist.
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Questions to answer before you agree to a plan
- Is each amount lockdown or non-lockdown? This decides which options are open to you.
- When is day 21? Use our 21-day DPN calculator.
- Can the company keep up with the instalments and its current obligations? Be realistic about cash flow.
- Are the company’s lodgements up to date? Overdue lodgements create new lockdown amounts and can affect eligibility for small business restructuring and safe harbour.
- Is the company insolvent? If it cannot pay its debts as they fall due, trading on raises insolvent trading risk. Safe harbour may help in some cases.
- Are other creditors pressing? A statutory demand or winding-up application changes the timetable.
Common questions
Does a payment plan stop a director penalty notice?
No. A payment plan does not remit a director penalty. It can keep the ATO from taking further action while the plan is kept, but you stay personally liable until the amount is paid.
Can I set up a payment plan after the 21 days?
The ATO may still agree to a payment plan. However, once the 21 days have passed, appointing an administrator or restructuring practitioner, or winding up the company, no longer remits the penalty for non-lockdown amounts.
What happens if the payment plan defaults?
The ATO can pursue the company and recover the director penalty from you personally, for example by garnishee notice, by offsetting credits owed to you, or through court proceedings.
Can the ATO issue a DPN while the company is on a payment plan?
Yes. A payment plan does not stop the ATO issuing a DPN for amounts that remain unpaid.
Sources: Taxation Administration Act 1953 (Cth) Schedule 1, Division 269, including sections 269-25, 269-30 and 269-40; Australian Taxation Office, Director penalty regime (last updated 16 April 2026). This page is general information, not advice about your circumstances. Last reviewed: 9 October 2026.
Written by Patrick Loi, Managing Principal and Registered Liquidator. Patrick has more than 20 years’ experience in corporate restructuring and insolvency and founded Greengate Advisory. Meet the team.
