The ATO issued 84,529 director penalty notices in 2024–25, more than double the year before. Each one pursues a director personally for the company’s unpaid PAYG withholding, GST or super guarantee charge. You have 21 days from posting to act, and your options depend on whether the company reported the debt on time.

Why this matters now

The ATO’s 2024–25 annual report records 84,529 notices issued to individual directors, covering liabilities of $5.5 billion. By 30 June 2025, $1.2 billion of that had been collected.

It comes as collectable tax debt tops $50 billion, about two-thirds of it owed by small businesses. In the same year, the ATO issued over 15,000 garnishee notices and disclosed about 24,000 business tax debts to credit reporting bureaus.

The Tax Ombudsman is now reviewing how the ATO administers these notices. Its terms of reference, released on 31 August 2026, cover how the ATO communicates with directors and considers their circumstances. They also cover vulnerability, coercive directorships and financial abuse. The final report is expected in April 2027.

How director penalties work

Directors become personally liable when their company does not pay PAYG withholding, GST or super guarantee charge by the due date. The penalty equals the unpaid amount, and each director is usually liable for all of it.

Resigning does not end your exposure for debts relating to your time as a director. A new director has 30 days from appointment to deal with existing debts before becoming liable for them.

Before it can recover, the ATO must issue a notice and wait 21 days. It generally sends the notice to your address on the ASIC register. The 21 days runs from the day the notice is posted, not the day you open it.

Lockdown or not: the reporting test

Everything turns on whether the company reported the debt on time.

  • Non-lockdown. PAYG withholding or GST was reported within three months of its due date. The penalty can still be remitted by acting within the 21 days.
  • Lockdown. The debt was reported later, or never. Only payment in full will remit the penalty. Administration or liquidation will not help.
  • Super. For paydays from 1 July 2026, the test applies payday by payday. As our Payday Super article explains, a shortfall must be disclosed within 60 days of payday, or before any earlier ATO assessment.

Your options when a notice arrives

For a non-lockdown penalty, only four steps within the 21 days will remit it:

  1. the company pays the debt in full;
  2. an administrator is appointed;
  3. a small business restructuring practitioner is appointed; or
  4. the company begins to be wound up.

A payment arrangement with the ATO is not one of them. Choosing between the four is a solvency question. A solvent company may simply pay. An insolvent one needs a formal process. Small business restructuring is open only to companies with liabilities of no more than $1 million, among other conditions.

The statutory defences are narrow. They cover a director who, through illness or another good reason, took no part in management. They also cover a director who took all reasonable steps to bring about one of the four outcomes. For GST and super, it is also a defence if the company took a reasonably arguable position and took reasonable care.

If nothing is done, the ATO can offset the penalty against your own tax refunds, issue garnishee notices or sue. Directors can also lose credit for tax withheld from their own pay if the company does not remit it.

For a fuller guide to the options and defences, see our director penalty notices page.

What directors should do now

  1. Keep your address on the ASIC register current, and make sure mail sent there reaches you.
  2. Lodge activity statements on time, and disclose any missed super promptly, even when the company cannot pay. It keeps penalties out of lockdown.
  3. If a notice arrives, diarise the deadline from the posting date and get advice the same day.
  4. Check each amount on the notice: the tax type, the period and when it was reported.
  5. Assess solvency honestly before choosing between payment, restructuring, administration and liquidation.

What to watch

  • The Tax Ombudsman’s report. Due in April 2027, it may lead to changes in how notices are issued and followed up.
  • The ATO’s 2025–26 figures. The next annual report will show whether notice numbers are still rising.
  • Super notices under Payday Super. With a separate lockdown test for each payday, super penalties are likely to lock down faster.

To discuss how these developments affect you, contact us on +61 7 3229 9800 or send us an enquiry online.

This article is general information only and is not legal advice.

Sources: ATO — Commissioner of Taxation annual report 2024–25; ATO — Deputy Commissioner Anna Longley, speech to The Tax Institute Tax Summit (5 September 2025); Inspector-General of Taxation and Taxation Ombudsman — Terms of reference: Review of the ATO’s administration of Director Penalty Notices (31 August 2026); ATO — Director penalties; ATO — PAYG withholding non-compliance tax; Treasury Laws Amendment (Payday Superannuation) Act 2025 (Cth); Taxation Administration Act 1953 (Cth), Schedule 1, Division 269.