ATO’s use of DPNs under review: Tax Ombudsman

As a compliance tool used by the ATO to recover tax debts from directors personally, the Tax Ombudsman has found that the ATO has increased its use of director penalty notices (DPNs) in recent years, and today (1 September) is launching a review into the effectiveness of their use by the ATO.

According to its findings, the ATO has issued more than 84,000 DPNs in the 2024–25 financial year for unpaid taxes or superannuation charges, a 136 per cent increase on the previous year.

The launch of the Tax Ombudsman’s latest review, Review of the ATO’s use of Director Penalty Notices, will build on feedback from the 2025 review into the identification and management of financial abuse within the tax system.

This review found that abuses included the appointment of individuals as company directors without consent.

“This review will also consider how the ATO responds to people in vulnerable circumstances including those unaware of the liabilities due to personal circumstances, illness, coerced directorships or financial abuse,” Tax Ombudsman Ruth Owen said.

“We also aim to identify where improvements may be needed while continuing to protect public revenue and employee entitlements,” the review’s terms of reference read.

While Owen accepted that DPNs are important for accountability and protecting revenue and employee entitlements, she said they could have serious consequences for individuals if not issued carefully and fairly.

“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,” the terms of reference said.

“Being a company director comes with some important responsibilities and personal liabilities. Many directors don’t fully understand this and can get caught with a very nasty surprise from the Tax Office. My review will look at whether the ATO’s approach to issuing DPNs is fair, effective and supported by strong safeguards,” Owen said.

Owen opened consultation for the review today, calling on various stakeholders to make submissions.

“Current and former company directors, tax professionals, financial counsellors, small business advisers and community organisations are encouraged to share their experiences with DPNs,” the ombudsman said.

“We appreciate any insights people can offer to help us understand how the system works in practice and where opportunities for improvement may be made to ensure fair, consistent and transparent administration of DPNs,” she added.

“We will examine the ATO’s letters, guidance, decision-making process and follow-up action. We will also look at clarity of communication to directors before and after receiving a DPN.”

The final report is expected in April 2027.

Consultation on the review is open until Tuesday, 29 September 2026.