ATO Turning Up the Heat: DPNs on the rise and SBRs under greater scrutiny
By Peter Biazos
There’s been a noticeable shift in how the ATO is approaching debt collection. We are seeing across the board that enforcement activity is increasing.
So, what’s driving this shift?
Well, according to ATO-released figures in July last year, there is still more than $50 billion sitting in unpaid tax debt, and this huge sum is what’s driving the aggressive recoupment approach, which in turn is shaping the current context.
DPNs and Wind-Ups on the Rise
Director Penalty Notices (DPNs) are being issued at pace.
According to a recent report from The Daily Telegraph: “Between July and December 2025 alone, the ATO triggered 739 insolvencies nationwide – 666 company wind–ups and 73 personal bankruptcies.”
The previous year recorded record highs for DPNs, and from our perspective, it’s clear that this trend is not slowing down.
What’s catching many directors off guard is that DPNs are no longer limited to large tax debts. They’re being issued for relatively small amounts, sometimes under $10,000. In practice, this means directors are being exposed to personal liability far earlier than they expect.
In many cases, the first sign of trouble is a phone call saying there are only days left to act.
Credit Reporting Continues to Increase
Another lever the ATO is pulling more frequently is credit reporting. Once a tax debt passes a certain threshold, the ATO can report it to credit bureaus. That information then shows up in company searches, making it harder to obtain finance or trade credit.
This isn’t just about reporting; it’s being used strategically to push businesses to the table and force engagement.
Industries Feeling the Strain
Some industries are being hit harder than others. Transport continues to feature heavily, but there’s also growing activity in mining services, an industry many wouldn’t expect to be under strain.
Behind the scenes, contract delays and deferred projects are creating cash flow issues, even where contracts haven’t technically been cancelled. In some cases, work has been pushed out by years, leaving businesses exposed in the meantime. The expectation is that more insolvency activity will emerge in this space as the year goes on.
Common Director Mistakes
When it comes to personal liability, the mistakes are often basic but costly.
Ignoring ATO correspondence is a big one. Many notices are still issued by post, and timeframes start from the date they’re sent, not when they’re opened. Some directors assume it’s just another routine letter and leave it unopened. But DPNs aren’t subtle. They’re in big, bold, different colours, and can’t be ignored!
Outdated addresses, poor communication with accountants, and a general lack of urgency all contribute to the problem. While directors are more aware of personal liability than they were a few years ago, DPNs still come as a shock to many, especially when they arrive unexpectedly and require immediate action.
Even One Missed Payment Can Trigger Action
Even businesses that believe they’re doing the right thing aren’t immune. Repayment arrangements are being enforced strictly, and a single missed or late payment can have serious consequences.
Missing a payment, even briefly, can result in the arrangement being terminated and enforcement action commencing almost immediately. Once that happens, there are limited options to address it.
Why SBRs Are Being Rejected
Small Business Restructurings (SBRs) are also facing tougher scrutiny. The biggest issue?
In my experience, compliance history is the big one.
Failure to lodge BAS or tax returns, or a history of poor compliance, makes approval difficult. Director loan accounts are another red flag.
If the ATO sees director’s loan accounts and ATO debt rising from their perspective, that signals poor financial decision-making and weak governance.
The ATO is also digging deeper into future viability. They’re reviewing and requesting cash flows now for forecasts and questioning whether a business will be viable going forward.
What the ATO Wants to See
For struggling but cooperative businesses, the fundamentals still matter.
The ATO wants to see lodgements being done on time. Cash flow forecasts are critical if the business intends on trading on. Profitability isn’t always required, but ongoing losses are a major concern.
Statutory Demands Are Serious
Ignoring ATO action is not an option. Statutory demands remain one of the most serious tools in the ATO’s kit.
Once issued, directors have 21 days to deal with it as required. If no payment or agreement is reached within that window, the ATO can move quickly to Court and apply to wind up the company. Ignoring a statutory demand is effectively inviting enforcement.
What Advisors Should Be Saying This Year
“Get in early.”
By the time many businesses ask for help, it’s already too late. But we know that the earlier advisors and specialists are brought in, the more options are available.
Final Thoughts
We are certainly not criticising the ATO’s approach. It’s important that our Referrers and their Clients recognise the environment we’re operating in. Enforcement is increasing, and directors are being held to account more quickly and more personally than before.
For small businesses and their advisors, the message is clear: act early.