Quick answer
A director penalty notice (DPN) makes you personally liable for your company's unpaid PAYG withholding, GST or super guarantee charge. The 21 days start on the day the ATO posts it or leaves it at your ASIC-registered address. A non-lockdown DPN can be cleared by paying, or by appointing an administrator, restructuring practitioner or liquidator. A lockdown DPN is only cleared by paying the debt.
Key points
- The clock starts when the ATO posts the notice, not when you open it.
- Lockdown or non-lockdown depends on whether the debt was reported on time.
- Paying the debt in full clears both kinds; only non-lockdown has other exits.
- Refinancing the company debt keeps the business trading and the director protected.
- Deadline
- 21 days from the date the DPN is posted
- Covers
- PAYG withholding, GST, super guarantee charge
- Who is liable
- Current directors, and some former ones
- Funding routes
- Property-secured $20k – $5m; unsecured $5k – $500k
A director penalty notice is the letter that turns a company tax problem into a personal one. Until it arrives, the debt belongs to the company. Once the 21 days run out, the ATO can pursue you, the director, for the same amount. That is why the first job is not panic, and not ringing the first insolvency firm that advertises. It is reading the notice closely enough to know which type you hold.
What does a director penalty notice actually cover?
The director penalty regime applies to three kinds of company debt:
- PAYG withholding — tax the company withheld from wages but didn’t pass on.
- GST — including luxury car tax and wine equalisation tax where they apply.
- Super guarantee charge — the charge that applies when employee super isn’t paid on time.
Income tax owed by the company is not part of the regime. Neither are trade creditors, rent or bank loans. If your company owes the ATO a mix of income tax and GST, the DPN will only name the categories above, and that number is the one that matters for your personal exposure.
The notice is generally sent to the address listed for you on the ASIC register. That detail matters more than it sounds, which is why we wrote a separate guide on keeping your registered address working for you.
Lockdown or non-lockdown: why does it matter?
This is the fork in the road. The ATO’s rules say that if the company reported the unpaid PAYG withholding or GST within three months of its due date, or reported the super guarantee charge by its due date, the director has more ways out. If it didn’t, the penalty is “locked down”.
| Non-lockdown DPN | Lockdown DPN | |
|---|---|---|
| When it happens | The debt was reported on time but not paid | The debt wasn’t reported on time |
| Pay the debt in full | Clears the penalty | Clears the penalty |
| Appoint a voluntary administrator | Clears the penalty | Does not clear it |
| Appoint a small business restructuring practitioner | Clears the penalty | Does not clear it |
| Company begins to be wound up | Clears the penalty | Does not clear it |
Notice what the table says about insolvency appointments. For a lockdown DPN, putting the company into administration or liquidation does nothing for your personal liability. The only exit is payment. That single fact is why so many directors with lockdown notices end up borrowing to pay the ATO rather than signing an appointment that costs them the business and still leaves the debt in their name.
How long do I really have?
Twenty-one days sounds generous until you count backwards. The period starts on the day the ATO posts the notice or leaves it at your registered address. Allow for postage, a weekend and a few days before you opened it, and a director can easily be down to two weeks.
Our debt letter triage tool counts it for you. Put in the date printed on the notice and it shows the calendar deadline and how many days are left. We suggest working to the day before that deadline, because a payment that clears late is a payment that didn’t happen in time.
What can I do today?
Whichever type you have, these steps help:
- Find the date on the notice and work out the deadline.
- Get the ATO figures. Log in to online services or ask your accountant for the company’s integrated client account balance, split by tax type.
- Check whether all lodgements are up to date. Unlodged BAS can hide more debt than the DPN shows.
- List what the company or its directors own. Property, even with an existing mortgage, opens the widest range of funding.
- Pull six months of business bank statements. They are the basis of any unsecured or cash-flow option.
- Talk to someone who can fund it, not only someone who can wind it up.
If you’d like a lending specialist to look at those numbers with you, you can start a short enquiry here. Nobody runs a credit check at that point.
How does funding clear a DPN?
In most cases, the aim is to pay the ATO in full before the deadline, so both the company debt and the personal penalty disappear together. The routes we look at include:
- A second mortgage or caveat loan over property owned by the company, a director or a related party, where there’s equity behind the first mortgage. Property-secured loans range from $20,000 to $5,000,000. Read more on caveat loans for deadline situations and second mortgages for tax debt.
- A full refinance of an existing mortgage to release equity, where time allows.
- Unsecured or cash-flow funding for trading businesses, anywhere from $5,000 to $500,000, assessed mainly on turnover and recent statements.
ATO debt is considered case by case. What a lender wants to see is a believable reason the debt built up and a clear plan for repaying the new facility — for example, a business that fell behind during a slow patch but is now trading profitably again.
An illustrative example
Illustrative only. A Brisbane joinery company receives a non-lockdown DPN for unpaid PAYG withholding and GST. Its director owns a home with a first mortgage and useful equity. Rather than appointing an administrator, the director arranges a second mortgage over the home to pay the ATO in full inside the 21 days. The penalty is remitted, the company keeps trading, and the second mortgage is refinanced into a longer-term facility once the next two quarters of BAS show the business is stable.
What if I’m a new or former director?
The ATO notes that new directors have 30 days to deal with company debts that existed when they joined, before they can become personally liable. Resigning doesn’t always help either: former directors can remain liable for amounts that fell due while they were on the board. If you’re in either position, move quickly and get advice on your own exposure as well as the company’s.
It also pays to check related companies. The ATO has said directors of several companies with unpaid GST, PAYG withholding or super who don’t engage may receive DPNs reflecting the combined amount across those entities.
Ready to see if the company can be funded out?
A DPN feels like the end of the road. Often it’s the moment a business is rescued, because it forces a decision while there’s still time to make one.
Here is how we work. Tell us about the notice and the business in about a minute. There’s no credit check at the first-enquiry stage, and your details aren’t shopped around to a list of lenders. A real person who deals with ATO deadlines reads it and calls you. Please be accurate about the DPN amount, the date on the notice and any property you own — it’s the difference between a useful first call and a wasted one.
Frequently asked questions
When does the 21-day period on a director penalty notice start?
The ATO says the 21 days start on the day it posts the DPN or leaves it at the address registered with ASIC. If the letter sat in a mailbox or went to an old address, some of those days may already be gone before you read it.
How do I know if my DPN is a lockdown DPN?
The notice itself says which remedies are available. A lockdown DPN arises when the company didn't report the PAYG withholding or GST within three months of the due date, or didn't report the super guarantee charge by its due date. In that case, only payment clears the penalty.
Can I pay a DPN with a loan?
Yes. Many directors clear a DPN by having the company, or a related entity, borrow against property or cash flow and pay the ATO in full. The loan must be for business purposes, and the lender will want to see how it will be repaid.
Does appointing an administrator make the problem go away?
For a non-lockdown DPN, appointing an administrator or liquidator within the 21 days remits the penalty. But you also hand control of the company to someone else, and the business may not survive. It is worth checking whether funding can clear the debt first.
I've just become a director. Am I liable for old debts?
The ATO says new directors have 30 days to act before they can become liable for amounts that were already unpaid. If you've recently joined a board, get the company's ATO position checked immediately.