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Business & ATO debt

Director penalty notice: what the 21 days mean for you.

A director penalty notice (DPN) from the ATO can make certain company tax and super debts a director’s personal debt. Which options are still open depends on when the company lodged and how much of the 21 days is left. We go through it with you before anything is decided.
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5 quick questions for company directors and business owners. Debt Negotiators is a fee-based service.
Good to know
The 21 days start on the day the ATO posts the notice, not the day you open it
If the company lodged late, paying the debt in full is usually the only way to remit the penalty
A payment plan isn’t one of the ways to remit a director penalty
Administration, restructuring and liquidation each have serious consequences for the company

Lockdown or non-lockdown? →

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The basics

What is a director penalty notice?

A director penalty notice is a notice the ATO gives to a current or former company director when the company hasn’t paid certain tax and super amounts. Those amounts can then be recovered from the director personally. The ATO calls them director penalties.

The ATO has to give you the notice before it can start recovering a director penalty. The notice sets out the unpaid amounts and the ways the penalty can be remitted, which means cancelled. You have 21 days to take one of them.

A director penalty is a parallel liability. Your liability mirrors the company’s, so a payment by the company or by any director reduces the amount for everyone. If the company has more than one director, each one can be liable for the same amount.

If the company hasn’t reported what it owes, the ATO can make a reasonable estimate, and director penalties can apply to that estimate. The business tax debt overview covers the wider picture.

Debts a DPN can cover
Pay as you go (PAYG) withholding
GST, including luxury car tax and wine equalisation tax, for tax periods starting on or after 1 April 2020
Super guarantee charge (SGC)
Other company debts, such as income tax or supplier accounts, aren’t director penalties. A personal guarantee can still make a director liable for those separately.
The key question

Lockdown or non-lockdown: which do you have?

The options depend on when the company reported the debt to the ATO, not on whether it was paid. Find the date on the notice, then look at when the BAS, IAS and SGC statements were lodged.
Non-lockdown: reported on time, not paid
PAYG withholding or GST was reported within 3 months of the due date, or SGC was reported by the SGC due date
Within the 21 days, the penalty can be remitted if the company pays the amount in full
Or if an administrator is appointed to the company
Or if a small business restructuring practitioner is appointed
Or if the company begins to be wound up
Lockdown: reported late or not at all
PAYG withholding or GST was reported more than 3 months late, or hasn’t been reported
SGC was reported after the SGC due date, or never reported
Amounts the ATO has estimated are treated as never reported
Appointing an administrator, restructuring practitioner or liquidator won’t remit the penalty
Paying the company debt in full is the only way to remit it
One notice can include both kinds of debt. If you’re not sure which applies, that’s the first thing we look at with you.
How we help

How it works with Debt Negotiators

1

Answer 5 quick questions
The business structure, roughly what’s owed, any notices, lodgements and any current payment plan. Start here.
2

We look at where things stand
The date on the notice, which debts it covers, the lodgement history, other directors, and any personal guarantees that sit outside the notice.
3

You hear the options, then decide
What each option involves and its downsides. Where restructuring looks worth exploring, we work with a practitioner from our panel of registered small business restructuring practitioners. We work with a panel of registered practitioners, and may receive a referral payment or fees for pre-insolvency work. We’ll tell you about any payment before you decide. If administration or liquidation looks like the right path, we’ll tell you and refer you to a registered practitioner.
When do the 21 days start?

On the day the ATO posts the notice, or leaves it at the address registered with ASIC. Not the day it reaches you.

If the registered address is out of date, some of the 21 days may pass before you see it.

New directors: you won’t be liable for penalties that were due before your appointment if, within 30 days of being appointed, the company pays in full, appoints an administrator or restructuring practitioner, or is wound up.

Former directors: resigning doesn’t end liability for debts from the time you were a director.

Your options

What can be done about a director penalty notice?

Every route has trade-offs. These are the ones we go through with directors, with the downside of each.

Pay the company debt in full
Paying the amount outstanding remits the penalty, for both lockdown and non-lockdown notices.
Good to know: the money has to come from somewhere. Business lending or funds from directors carry their own risks.

Business tax debt options →

Small business restructuring
For eligible small companies, a registered practitioner helps the directors put a plan to creditors while the directors stay in control.
Good to know: eligibility criteria apply. It only remits a non-lockdown penalty if the practitioner is appointed within the 21 days.

How SBR works →

Voluntary administration or liquidation
An administrator or liquidator is appointed to the company. Either remits a non-lockdown penalty if done within the 21 days.
Good to know: directors hand over control, and liquidation ends the company. These appointments are made by registered liquidators, not by Debt Negotiators.

How the options compare →

ATO payment arrangement
A payment plan can spread the company’s tax debt over time where the business can keep up with it.
Good to know: a payment plan isn’t one of the ways to remit a director penalty. It needs to sit alongside a decision about the notice, not replace it.

ATO payment arrangements →

Director defences
The ATO sets out three defences, such as illness keeping you out of management, or having taken all reasonable steps.
Good to know: they’re narrow, and relying on other directors or advisers isn’t a defence. A lawyer is the right person to assess one.

Working with an SBR practitioner
What a registered restructuring practitioner does, what they check, and how we work with one.
Good to know: only a registered liquidator can act as a restructuring practitioner. Debt Negotiators isn’t one.

About practitioners →

If nothing changes

What happens if the penalty isn’t remitted?

After the 21 days, the ATO can take action to recover the director penalty from you personally. You won’t have to pay it if you lodge a successful defence.

A DPN is one route to personal liability, not the only one. Personal guarantees on leases, loans and supplier accounts can make a director liable whatever happens with the notice. That’s why we look at the whole position, not just the notice.

How the ATO can recover a director penalty
Offsetting your personal tax refunds or credits against the penalty
Issuing a garnishee notice, for example to your bank or someone who owes you money
Taking legal action against you
You stay liable for a director penalty even after the company is deregistered

Director penalty notice questions

When do the 21 days on a director penalty notice start?

On the day the ATO posts the notice or leaves it at the address registered with ASIC, not the day you open it. If the registered address is out of date, some of the 21 days may pass before the notice reaches you, so check the date printed on it.

What is the difference between a lockdown and a non-lockdown DPN?

It depends on when the company reported the debt. If PAYG withholding or GST was reported within 3 months of the due date, or SGC by its due date, the penalty can be remitted within 21 days by paying in full, appointing an administrator or a small business restructuring practitioner, or starting to wind up the company. If it was reported late or not at all, paying the debt in full is the only way to remit it.

Does a payment plan stop a director penalty notice?

No. A payment arrangement isn’t one of the ways to remit a director penalty. Payments under a plan reduce the debt, and the penalty is remitted once the company debt is paid in full. Entering a plan doesn’t extend the 21 days for the other options.

Can a director penalty notice cover unpaid super?

Yes. The super guarantee charge is one of the debts a DPN can cover, along with PAYG withholding and GST. For SGC, the test is whether the SGC statement was lodged by its due date.

I became a director recently. Am I liable for earlier debts?

You won’t be liable for director penalties that were due before your appointment if, within 30 days of being appointed, the company pays the amount in full, appoints an administrator or a small business restructuring practitioner, or is wound up. Resigning within those 30 days doesn’t remove the liability.

Am I still liable if I resign as a director?

You can be. Resigning doesn’t remove liability for debts that were due before you resigned, or that relate to periods when you were still a director. You also stay liable after the company is deregistered.

What happens if I ignore a director penalty notice?

After the 21 days, the ATO can recover the penalty from you personally. That can include offsetting your tax refunds or credits, issuing a garnishee notice, for example to your bank, and taking legal action.

Is Debt Negotiators a liquidator or restructuring practitioner?

No. Debt Negotiators isn’t a registered liquidator, administrator or restructuring practitioner. We help directors understand where they stand and which options may be open. Where restructuring looks worth exploring, we work with a panel of registered small business restructuring practitioners, and may receive a referral payment or fees for pre-insolvency work. Debt Negotiators is a fee-based service.

See which options are still open

Answer 5 quick questions about the business and the notice, then a specialist calls to go through them with you.
Check your business optionsCall 1300 351 008
Debt Negotiators is a fee-based service. The information on this page is general and doesn’t take your circumstances into account. Outcomes depend on your situation, and no outcome is guaranteed. ACL 390820 · AFSA RDAA 1403.
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