What Is a Director Penalty Notice? The Finance Side of the 21 Days

A director penalty notice (DPN) is a written notice from the ATO telling you, as a current or former director, that you are personally liable for a penalty equal to your company's unpaid PAYG withholding, GST or super guarantee charge. It gives you 21 days to have that penalty remitted, and paying the company's debt in full is one of the ways to do it.

If the company does not have the cash, a loan to the company, backed by property owned by you or the company, gives it the funds to make that payment. We lend from $250,000 to $10,000,000, decide in hours and can settle within 24 hours once terms are agreed, so the company can pay the ATO inside the 21 days.

What a director penalty notice is

The ATO says: "You may become personally liable for your company's unpaid amounts of:" pay as you go (PAYG) withholding, goods and services tax (GST) and super guarantee charge (SGC). It calls the amounts you are personally liable for "director penalties".

The notice does not create the penalty. Under the Taxation Administration Act 1953 (Schedule 1, section 269-20), a director's penalty "is due and payable at the end of the due day", which is the day the company's payment was due. What the notice does is allow the ATO to start recovering it from you. Section 269-25 says the ATO "must not commence proceedings to recover from you a penalty payable under this Subdivision until the end of 21 days after the Commissioner gives you a written notice under this section."

The ATO's director penalties page says: "A DPN is a notice we must give you first before we can take action to recover director penalties. The notice outlines the unpaid amounts that you are liable for and remission options available to you."

So the 21 days are not the start of a new debt. They are the last period in which you can have a penalty you already owe remitted, before the ATO can pursue you for it personally.

Who can receive one

A DPN can go to anyone who was a director while the company's obligation existed, and resigning does not end your liability.

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  Former directors. The ATO says that if you resign, you can still be liable for amounts that were due before you resigned, and for some amounts that fell due afterwards but relate to a period when you were a director. It also says: "Resigning as a director does not remove your obligation or alleviate the penalty (Canty v Deputy Commissioner of Taxation [2005] NSWCA 84 at [25])."
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  New directors. You can be liable for amounts that were due before your appointment, unless within 30 days of being appointed you ensure the company pays the amount in full, appoints an administrator or a small business restructuring practitioner, or is wound up.
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  After deregistration. The ATO says: "If you are liable for a director penalty, you remain liable after the company is deregistered."

One payment reduces your penalty and the company's debt

The ATO calls a director penalty "a parallel liability" and says "any payments made to either the company's liability or the director's liability will reduce the liability for both equally." Section 269-40 of the Act says that when an amount is paid towards one of the liabilities, "each of the other liabilities in existence at that time is discharged to the extent of the same amount."

The ATO's own example has two directors, Taylor and Cam, and a company that did not pay $4,000 of PAYG withholding. Each director receives a DPN for $4,000. When the company pays $1,000, both directors' penalties fall by $1,000.

This decides how much money is needed. Where there are two or three directors, the ATO is not owed two or three times the debt. The amount to fund is the company's unpaid balance, once, and one payment by the company reduces every director's penalty by the same amount.

When the 21 days start

The 21 days start when the ATO sends the notice, not when you open it. The ATO says: "The 21 days starts on the day we post the DPN or leave the DPN at the address registered with ASIC." Section 269-25 of the Act says the notice "is taken to be given at the time the Commissioner leaves or posts it."

For a current director, the ATO says it will generally send the DPN to the address registered with ASIC. If you have given the ATO a registered tax agent's address for service, the Act allows it to send a copy to your tax agent as well (section 269-52), but the 21 days still run from when the ATO posts or leaves the notice itself.

A notice that sat in the letterbox for five days has already used five of the 21 days, and a notice sent to an old address can use more. Count from the date the ATO posted it.

What you can do inside the 21 days

The ATO lists four ways a penalty can be remitted within the 21 days, where the company reported PAYG withholding or GST within 3 months of its due date, or reported super guarantee charge by the SGC due date:

1. •
   The company pays the amount outstanding in full.
2. •
   An administrator is appointed to the company.
3. •
   A small business restructuring practitioner is appointed to the company.
4. •
   The company begins to be wound up.

Reporting dates change this. If PAYG withholding or GST was reported more than 3 months after its due date, or never reported, the ATO says the penalty "can only be remitted by paying the corresponding company liability in full". For super guarantee charge reported after the SGC due date, or never reported, paying in full is again the only way. The ATO also says its estimates of unpaid amounts "are treated as amounts that were never reported."

Paying in full is the only route that remits every amount on the notice, whether it was reported within those time limits, after them or not at all, and the only one of the four that does not appoint an administrator, a restructuring practitioner or a liquidator to the company.

There are also defences, such as illness that kept you out of management, or having taken all reasonable steps. Whether one applies to you is a question for your solicitor. Which route suits your company is a question for your accountant or an insolvency practitioner. We are a lender, and we do not give tax, legal or insolvency advice.

What happens to you personally after the 21 days

If the penalty is not remitted within the 21 days, the ATO says "we may take action against you to recover the director penalty amounts." On its firmer action page, the ATO says it can recover a director penalty by:

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  issuing garnishee notices
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  offsetting any of your tax credits against the director penalties
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  initiating legal recovery proceedings against you.

A garnishee notice requires someone who holds or owes you money to pay it to the ATO instead. For individuals, the ATO lists your employer or contractor, the banks where you hold accounts, and "people who owe money to you from the sale of real estate, such as purchasers, real estate agents and solicitors." If you were planning to sell a property to pay the debt, the proceeds of that sale can be garnisheed.

If the ATO takes legal action and a court recognises the debt, the ATO's legal action page says it may enforce the judgment "in several ways, including by filing and serving a bankruptcy notice." That page covers ATO debts generally, not only director penalties.

A payment plan does not remit the penalty

A payment plan that covers the company's debt stops the ATO from starting court proceedings against you while it is in force (section 269-15 of the Act). It is not one of the ways a penalty is remitted. If the plan ends before the debt is paid, your personal liability for the unpaid amount is still there.

How a loan lets the company pay its ATO balance inside the 21 days

Paying in full needs the money now. Where the company does not have it, a short-term loan backed by property gives the company the funds to pay its ATO balance in one payment, which remits the penalty for every director on that amount.

The property can be your home, an investment property or the company's commercial or industrial property. The company is always the borrower. Where the company owns no property, a director's property can be the security for the company's loan, and a second property can be added as additional security, within the 70% maximum LVR. A live ATO tax debt listing is not, on its own, a reason we decline.

We lend our own funds and our in-house team values the property, so there is no wait for an outside valuer or a funder's approval. At settlement the loan funds are paid to the company, which then pays the ATO in full using its own payment reference number (PRN). The ATO says "Payments can take up to 4 business days to be received by us and appear on your ATO account", and that using an incorrect PRN can delay a payment, so the loan should settle with at least 4 business days of the 21 left for the company's payment to reach the ATO.

The company repays the loan to us through a defined exit strategy, for example a refinance or the sale of a property. Our tax debt loans page sets out how the product works across all ATO debts, and a $500,000 second mortgage gave one company the funds to pay its ATO debt before the DPN's 21 days ran out.

A loan adds a new debt for the company. A payment to a creditor, including the ATO, made while the company is insolvent can in some cases be recovered by a liquidator as an unfair preference. If you are unsure whether the company can pay its debts as they fall due, speak to an insolvency practitioner before the company borrows.

Payday Super and DPNs for super

Since 1 July 2026, employers pay super guarantee under Payday Super, with each pay run rather than each quarter. The ATO says a contribution is on time if it is received by the employee's fund "within 7 business days after paying your employee." For director penalties, the Act now treats the super guarantee charge for each payday (the ATO calls it the QE day, "the day you pay your employees an amount of qualifying earnings") as due no later than the day after a 60-day period that starts on that payday (section 269-10). If the company's super is behind, our Payday Super loans can give the company the funds to pay the shortfall before the ATO issues a DPN for it.

What to send us on the day the notice arrives

Our loans are backed by real property. To give you an answer the same day, send:

1. •
   The director penalty notice, with the date the ATO posted it.
2. •
   The company's ATO statement of account.
3. •
   When the company lodged the BAS and super reports behind the debt.
4. •
   The property that could back the loan, its estimated value and the balance of any loan already on it.
5. •
   How the company plans to repay the loan, and roughly when.

Or call 1300 795 175. When you are ready to apply, our page on funding a director penalty notice within the 21 days sets out each step from the first call to the company's ATO payment.

FAQ

Is a director penalty notice a debt in my name?

Yes. It sets out a penalty you owe personally, equal to the company's unpaid PAYG withholding, GST or super guarantee charge. Under the Act the penalty is already due before the notice is sent. The notice is what the ATO must give you before it can sue you for it.

If the company pays, do I still owe anything?

You owe only the amount the company has not paid. A payment by the company reduces your penalty, and every other director's penalty, by the same amount. If the company pays the full amount on the notice, nothing is left for the ATO to recover from you on that notice.

Does resigning as a director stop a DPN?

No. The ATO says resigning "does not remove your obligation or alleviate the penalty." You can still be liable for amounts that were due, or that relate to periods, before you resigned.

Can a payment plan stop a DPN?

A payment plan stops the ATO taking court action against you while the plan is in force, but it does not remit the penalty. If the plan ends before the company's debt is paid, the personal liability remains.

Does a DPN cover GST?

Yes. The ATO lists PAYG withholding, GST and super guarantee charge as the company amounts a director can become personally liable for.

Can you lend to pay a DPN?

Yes. We lend from $250,000 to $10,000,000 to the company, which then pays its ATO balance in full. The loan is secured by a first or second mortgage over residential, commercial or industrial property owned by you or the company, up to a maximum LVR of 70%. We decide within hours and can settle within 24 hours once terms are agreed.

Gino Tabila

Associate Director

Mark Hutchins

Managing Director