Director penalty notices: advice for company directors

A director penalty notice (DPN) is the ATO’s demand that you personally pay your company’s unpaid PAYG withholding, GST or super guarantee charge. If the company reported the debt on time, acting within 21 days can remit the penalty. If not, the penalty is “locked down” and only payment will clear it.

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Key points

Each director’s penalty equals the company’s full unpaid amount.
The 21 days run from the day the ATO posts the notice, not the day you receive it.
For reported debts, payment or a formal insolvency appointment within 21 days may remit the penalty.
For debts reported late or not at all (a “lockdown DPN”), only payment remits the penalty.
The defences are narrow. Early advice keeps the most options open.

General guidance only – not legal advice. Please obtain independent legal advice before relying on any of this information. The law is stated as at September 2026.

What is a director penalty notice?

Directors must ensure their company pays its PAYG withholding, GST and super guarantee charge (SGC) on time. If it does not, each director becomes liable to a penalty equal to the unpaid amount.

The rules are in Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth). They are federal, so they apply to Queensland companies as they do elsewhere.

The ATO cannot sue to recover the penalty until 21 days after it gives you a DPN. It can post the notice to your residential or business address in ASIC’s records. The notice is given on the day it is posted, even if it reaches you late.

What are your options within the 21 days?

If the company reported the debt on time, the penalty may be remitted if, within 21 days, the company:

pays the debt in full;
appoints a voluntary administrator;
appoints a small business restructuring practitioner; or
begins to be wound up, for example by appointing a liquidator.

A payment plan with the ATO is not on this list. Choosing between the options is a solvency question. A solvent company may simply pay. An insolvent company usually needs a formal process.

Once the 21 days pass, these appointments no longer remit the penalty. Only payment will then clear it.

What is a lockdown director penalty notice?

A penalty is “locked down” when the company did not report the debt on time. An administrator, restructuring practitioner or liquidator will not then remit it. Only payment will.

The reporting deadlines are:

PAYG withholding: reported in an activity statement or through Single Touch Payroll within three months of the due date.
GST: the GST return, usually the business activity statement, lodged within three months of the due date.
Super guarantee charge: under Payday Super, which started on 1 July 2026, the test applies to each payday. A shortfall must be disclosed in a voluntary disclosure statement by the “due day”. That is broadly 60 days after payday, or earlier if the ATO assesses the charge first.

For quarters before 1 July 2026, the test is whether an SGC statement was lodged on time. With a deadline for every pay run, super penalties can now lock down quickly.

What should I do if I receive a director penalty notice?

Diarise day 21. Count from the posting date. If in doubt, count from the date on the notice.
Get legal advice immediately.
Check each amount. Confirm the tax type, the period and when it was reported. This decides whether it is locked down.
Tell your co-directors. They may also have received notices.
Assess solvency with current figures. Then decide on payment or a formal appointment before day 21.
Keep records of the steps you take. They may support a defence.

What happens if the penalty is not remitted?

The ATO can recover the penalty from you personally. It may offset it against your own tax refunds and issue garnishee notices to your bank or employer. It may also start court proceedings, which can lead to bankruptcy.

Other consequences can follow:

Estimates. If the company has not reported, the ATO may estimate the unpaid amount and base a penalty on it. An estimate can be reduced or revoked by statutory declaration or affidavit, so act promptly.
Lost tax credits. Directors, and some of their associates, can lose credit for tax withheld from their own pay.
Credit reporting. The ATO may report a company’s tax debt to credit reporting bureaus. This applies where at least $100,000 is overdue by more than 90 days and the company is not engaging.

Are there any defences?

The statutory defences are narrow. You are not liable if:

because of illness or another good reason, you could not reasonably be expected to take part in management, and did not;
you took all reasonable steps to bring about one of the four outcomes above, or no such steps were possible; or
for GST and super, the company took a reasonably arguable position and reasonable care.

Relying on co-directors or advisers is not a defence. For the first two defences, give the ATO supporting information within 60 days after it notifies you of a garnishee or other recovery. In court, you must prove those defences.

How Taylor David can help

Our work for directors facing a DPN includes:

urgent advice on your options within the 21 days;
reviewing each liability for lockdown and possible defences;
assessing solvency and coordinating a restructuring, administration or liquidation where appropriate;
negotiating with the ATO, including on estimates and payment terms; and
defending ATO recovery proceedings and responding to garnishee notices.

See also our Insolvency, Reconstruction and turnaround and Litigation pages.

Frequently asked questions

Questions we are often asked

I am a new director. Am I liable for debts incurred before I joined?

Potentially, yes. You become liable if the debt remains unpaid 30 days after your appointment. You may avoid this if, within those 30 days, the company pays, appoints an administrator or restructuring practitioner, or begins to be wound up. For PAYG withholding and GST, the three-month reporting period runs from your appointment if you join during or after it.

I have resigned as a director. Can I still receive a DPN?

Yes. Resigning does not end your liability for debts due before your resignation. Nor does it end liability for later debts relating to your time as a director. The ATO can send the notice to the address ASIC’s records show for you. Keep that address current and make sure mail sent there reaches you.

Will a payment plan with the ATO stop the penalty?

A payment plan does not remit a director penalty. While an instalment arrangement for the company’s debt is in force, the ATO cannot take court action against you for the penalty. It can still issue a DPN. If the arrangement ends, proceedings can follow. For a penalty that is not locked down, only the four steps above, taken within 21 days, remit it.

What if the notice was sent to an old address?

The 21 days generally still run. The ATO can use any residential or business address shown in ASIC’s records within the previous seven days. The notice is treated as given when posted. Your company must tell ASIC of a change to your residential address within 28 days.

Can small business restructuring help with a director penalty?

It can, if the practitioner is appointed within the 21 days and the penalty is not locked down. The company must be eligible. Its total liabilities must not exceed $1 million, employee entitlements then due must be paid and tax lodgements must be up to date. A later appointment will not remit the penalty, although payments under a restructuring plan may reduce it.

General guidance only – not legal advice. Please obtain independent legal advice before relying on any of this information. The law is stated as at September 2026.

Related expertise

Insolvency →Reconstruction & Turnaround →Litigation →

The earlier we talk, the more options you have.

To discuss your situation in confidence, call Scott D. Taylor on +61 7 3229 9800, email [email protected] or send us an enquiry online.

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