‘Why are we doing DPNs in bulk?’: ATO’s DPN issuance needs balanced approach

According to the Tax Ombudsman Ruth Owen, the ATO issued more than 84,000 DPNs in the 2024–25 financial year for unpaid taxes or superannuation charges, representing a 136 per cent increase on the previous year.

The ATO uses DPNs as a compliance tool to recover selected tax debts from a company’s director personally, with Owen noting that the ATO has increasingly been using them in recent years.

Saby questioned why the ATO has ramped up issuances of DPNs to such a large degree, noting that his office receives multiple calls a week asking for assistance with managing their DPNs.

“Where were those DPNs in the last 20 years? Why are we doing this now? Why is there no balanced approach? Why are we just doing them in bulk? What has changed? There needs to be answers,” Saby said.

The Tax Ombudsman is currently reviewing the ATO’s administration of DPNs, and examining whether it is striking the right balance between protecting public revenue and fair treatment of company directors.

Saby said he lodged a submission into the review where he argued that the DPN regime, as it is currently being implemented by the ATO, is “unjust and not equitable”.

He cited an example of a case of ID fraud, which he is defending against the ATO, where an international student worked as a cleaner, and their supervisor made the student a director without the consent of that individual.

The individual received a DPN several years later despite never having created that entity. However, Saby said the ATO put the onus on the individual to resolve the identity fraud issue with ASIC.

“I said, no, the ATO and ASIC as two government agencies should be communicating and collaborating with each other, and the ATO should be withdrawing the DPN,” Saby said.

“Why are they putting the burden on the individual who may have to run a business or look after their family all day? They are taxpayers, not tax criminals. There’s a high level of disengagement that’s taking place at the moment.”

Are automated systems used for DPNs?

Saby questioned how the ATO has the resources to issue tens of thousands of DPNs in one financial year and wondered if it uses an automated system or artificial intelligence to undertake the issuances.

“This is my speculation and inference because how are they suddenly able to send 84,000 DPNs in one financial year?” he said.

“I worked at the ATO for 15 years. I never saw this level of activity where DPNs were sent out in bulk. When I was at the ATO, it would take an hour to write one letter. We didn’t have resources designated to issue DPNs. Surely, they’re doing data matching.”

Saby said his concern is that the ATO’s data matching systems automatically identify and penalise timing discrepancies without accounting for context.

“I think the challenge at the moment is that there is no human intervention where the ATO can characterise the difference between genuine hardship cases and those who do the wrong thing intentionally,” he said.

Accountants Daily approached the ATO with questions about whether it uses AI or automated systems to determine who to issue DPNs to, but an ATO spokesperson said the ATO does not use automated decision-making on superannuation guarantee (SG) assessments or penalties, including DPNs.

“The ATO does not use AI to make compliance decisions or determine a taxpayer's obligations,” the spokesperson said.

“The ATO’s AI transparency statement states that ‘decision-making that adversely impacts taxpayers' rights will always be made by a human. Taxpayers have a right of review of our decisions. Their rights apply regardless of the technology we use to help us make those decisions’.”

‘You’re not a criminal’

Saby urged small businesses and their accountants to engage early with the ATO if they receive a DPN.

“Don’t be disengaged or scared of the DPN letter,” he said.

“You’re not a criminal. It’s a civil matter. I would suggest that you talk to the ATO and ask for more time so you can understand the consequences of a DPN and find the right person to represent you.”

In its submission to the Tax Ombudsman’s review of the ATO’s administration of DPNs, The Tax Institute argued that the regime is seen as “unfair”, particularly when taxpayers face genuine compliance barriers, or have a limited understanding of their rights or obligations when issued with a DPN.