A director penalty notice makes a company debt your personal debt.
The ATO issued approximately 85,000 of them in 2024-25, covering $5.5 billion in liabilities. Enforcement resumed after the pandemic pause and has not slowed.
Most directors first learn how these work after receiving one. That is the expensive way.
What they cover
Three liabilities:
- PAYG withholding — tax withheld from employee wages
- GST — collected from customers
- Superannuation guarantee charge — unpaid super
The common thread: all three are money the company collected or withheld on someone else’s behalf. It never belonged to the business. That is why the law permits piercing the corporate veil here and not for ordinary trade debt.
The two types — this is the whole thing
Non-lockdown DPN
Issued when the company lodged on time but did not pay.
You have 21 days from the date on the notice, and four ways to respond:
- Pay the debt in full
- Appoint an administrator
- Appoint a small business restructuring practitioner
- Begin winding up the company
Take any one and the director penalty is remitted. You have options.
Lockdown DPN
Issued when the company failed to lodge within the required period — three months after the due date for PAYG and GST, or by the lodgement day for SGC.
You have one option: pay.
Appointing an administrator does not help. Liquidating does not help. The penalty is locked in and it is personally yours.
The single most important thing on this page
Lodgement and payment are separate obligations.
Lodging on time while unable to pay keeps you in non-lockdown territory, where you have four ways out.
Failing to lodge — often because a director feels there is no point lodging something they cannot pay — converts a company cash flow problem into personal liability with no remedy.
Lodge on time regardless of whether you can pay. It costs nothing and it preserves every option you have.
Twenty-one days, and how they are counted
The 21 days run from the date on the notice, not the date you received it.
The ATO sends it to the address on ASIC’s register. If your registered address is out of date, the clock is running while the notice sits somewhere you no longer are — and that is not a defence.
Check your ASIC address today if you have not recently. It is a five-minute task that has cost directors their homes.
Who is exposed
Current directors for debts incurred during their appointment.
New directors — you become liable for pre-existing unpaid amounts if they remain unpaid 30 days after your appointment. Do the tax debt due diligence before you sign anything.
Former directors remain liable for liabilities that arose while they were appointed. Resigning does not escape it.
The limited defences
Very narrow, and rarely successful:
- You did not take part in management due to illness or another acceptable reason
- You took all reasonable steps to ensure the debt was paid, an administrator appointed, or the company wound up
- For SGC only, the company took a reasonably arguable position on the superannuation guarantee
“I did not know” is not a defence. Directors have a positive duty to ensure the company meets these obligations.
If you are behind now, before any notice arrives
Lodge everything outstanding immediately. This is the highest-value action available and it is entirely within your control. It keeps future notices non-lockdown.
Check your ASIC registered address.
Arrange a payment plan. Over 655,000 were on foot as at 30 June 2025, covering roughly $11.7 billion. Terms offered to a business that comes forward are consistently better than terms offered to one being chased.
Understand the cost of waiting. General interest charge runs around 10.96%, compounds daily, and stopped being tax-deductible on 1 July 2025 — roughly 14.6% pre-tax for a company at the 25% rate.
Get advice early. A restructuring practitioner or insolvency adviser engaged at month two has far more to work with than one engaged on day 19 of a notice.
The context
Australian small business owes $35.9 billion in collectable tax debt, up $19.4 billion since 2018-19. Roughly $34.7 billion of it is unpaid activity statement debt.
Almost none of those directors set out to borrow from the ATO. They spent GST and PAYG that was already spoken for, in a month that was tight, intending to catch up.
The fix is structural and unglamorous: a separate tax account, and a transfer on every deposit received. One afternoon to set up, and it removes an entire category of personal risk.
Where to go next
- ATO Tax Debt Is One of the Most Expensive Loans in Australia\n- Business Cash Flow in Australia\n- Payday Super Readiness Checklist\n- Australian Business Compliance Calendar
Sources: Australian Taxation Office; ANAO performance audit of ATO small business collectable debt management. This is general information only and not legal or tax advice. Director penalty notices carry serious personal consequences — if you have received one, obtain professional advice immediately.