Director penalty notice: what to do in your 21 days

A director penalty notice is the letter that turns a company's tax debt into your personal debt. It makes a director personally liable for the company's unpaid PAYG withholding, GST and superannuation, and it comes with a 21-day clock. Aurelius Private are private lending brokers; we arrange finance to clear the company debt fast, which is one of the ways a director gets out from under one before it becomes personal.

If one has landed on your desk, the worst thing you can do is put it in a drawer. The second worst is assume you have three weeks. You might have less. Here is how a DPN actually works, and what your options are.

What a director penalty notice actually is

A DPN is the ATO's tool for reaching past a company and holding its directors personally responsible for certain unpaid tax. The technical phrase is a parallel liability: the director penalty is a mirror of the company's debt. While the debt sits in the company, the ATO can chase the company. Once a DPN is issued, it can chase you. The ATO's own guidance on the director penalty regime is the source of truth on the detail.

DPNs are common now, and the ATO follows through. It went back to hard collection through 2025, and director penalty notices were the sharp end of it. If your company owes PAYG, GST or super and has gone quiet with the Tax Office, a DPN is a realistic next step, not a distant one.

What it makes you personally liable for

A DPN covers three company liabilities, and only these three:

• PAYG withholding, the tax withheld from employees' wages
• GST, the net GST reported on the business activity statement
• The superannuation guarantee charge, unpaid employee super plus its penalties and interest

Company income tax is not on that list. A DPN cannot make you personally liable for the company's income tax debt. That does not mean the income tax debt is harmless, because the company still owes it and the ATO can still wind the company up over it. But the personal exposure a DPN creates is limited to PAYG, GST and super.

Two types: lockdown and non-lockdown

Which DPN you get depends on one thing: whether the company lodged on time. It is the one fact that decides whether you have real options or only one.

A non-lockdown DPN is issued when the company lodged its BAS and super statements on time, or within three months of the due date, but did not pay. You still have choices. A lockdown DPN is issued when the company failed to lodge on time. There, the door is mostly shut: the only way to remit a lockdown penalty is to pay the debt in full. Appointing an administrator or a liquidator will not clear it. This is why lodging on time matters even when you cannot pay. Lodging keeps you in non-lockdown territory and keeps your options open.

The 21 days start before you open the envelope

This is the trap that catches directors out. The 21-day period runs from the date the ATO issues the notice, not the day you receive it. The ATO posts it to the director's address on the ASIC register. If that address is old, or you have moved, or the post is slow, days of your window are gone before the letter reaches you. Some directors have found out about a DPN with only a week left on it.

Two lessons follow. Keep your ASIC address current, always. And the day a DPN appears, work out the real issue date and count from there, not from the postmark or the day it hit your desk.

Your options inside 21 days

For a non-lockdown DPN, you can remit the penalty within the 21 days by doing any one of these:

• Paying the company debt in full
• Appointing a voluntary administrator
• Appointing a small business restructuring practitioner
• Beginning to wind the company up

The last three are formal insolvency steps with real consequences for the business, and they are decisions to make with an accountant and an insolvency lawyer, not on your own under pressure. Paying the debt is the one option that keeps the company trading and the director clear. It is also the one that needs money you may not have on hand. That is where finance comes in.

Where finance fits

Because the penalty mirrors the company debt, paying out the company's PAYG, GST and super discharges the director penalty for those amounts. If the company has property, or you do, that debt can be cleared with a loan secured against it, and it can settle inside the 21-day window when a payment plan cannot be agreed in time. This is exactly what ATO tax debt finance is for. It is business-purpose lending, secured against property, priced above the banks because it moves at a speed the banks do not. Once the ATO is paid and the company's lodgements are current, the deal refinances to a cheaper, longer-term facility.

It is not the right answer for every director. If the business is not viable, borrowing to pay the ATO only moves the problem. But where the company is sound and the debt is a timing problem rather than a solvency one, clearing it fast is often what keeps a good business trading and a director's house out of it. We set out the wider finance options for an ATO debt separately.

What to do the day one lands

Move in this order:

• Find the issue date on the notice and count your real 21 days
• Call your accountant, and an insolvency lawyer if it is a lockdown notice
• Check the amounts against the company's PAYG, GST and super records
• Work out whether the debt can be paid, and if not, by what date
• If paying is the plan but the cash is not there, line up finance now, not on day 20

None of this is legal or financial advice on your specific notice; a DPN is serious enough to warrant proper advice from your own accountant and lawyer. What we can do is tell you quickly whether the debt can be cleared with finance, and how fast.

Start with the numbers

If you have had a DPN, or you can see one coming, the fastest way to know whether finance can clear it in time is to put the debt and the security in front of a broker who can take it to the right lender. Start your application or get in touch, and tell us the deadline first, so we can work to it.