Short answer: A director penalty notice makes you personally liable for your company’s unpaid PAYG withholding, GST and super guarantee charge. The ATO can start recovery 21 days after it issues the notice. If the debt was reported on time, paying in full, appointing an administrator or restructuring practitioner, or winding up within 21 days remits it. A payment plan does not.
What is a director penalty notice?
A director penalty notice, or DPN, is the ATO telling you that your company’s tax debt is about to become your personal debt. It covers three kinds of liability: unpaid PAYG withholding, unpaid GST (including luxury car tax and wine equalisation tax) and unpaid super guarantee charge (ATO).
The notice is posted or left at your address as it appears on the ASIC register. That detail matters more than it sounds. The ATO can start recovery 21 days after it issues the notice, not 21 days after you open the envelope. If your ASIC address is an old house, a former office or an accountant you stopped using, some of your 21 days may be gone before you see it.
These notices are no longer rare. In 2024–25 the ATO issued more than 84,000 DPNs to directors of about 64,000 companies, a 136% increase on the year before (ATO). The Tax Ombudsman began a review of how the ATO uses them in 2026. None of that changes your 21 days.
One more thing before the detail. The rules for super changed on 1 July 2026 with Payday Super, including how director penalties work for super. If any part of your notice relates to super, check how the new rules apply with your adviser. Our guide to Payday Super and cash flow covers the practical side.
Lockdown or non-lockdown: which one have you got?
You will hear advisers talk about ‘lockdown’ and ‘non-lockdown’ DPNs. That is industry shorthand, not ATO wording, but the difference between them is the most important thing in this guide. It turns on when the company reported the debt, not when it paid it.
| Type | When it applies | What remits it within 21 days |
|---|---|---|
| Non-lockdown | PAYG withholding or GST reported within 3 months of the due date, or super guarantee charge reported by its due date | Paying in full, appointing an administrator, appointing a small business restructuring practitioner, or the company beginning to be wound up |
| Lockdown | Reported more than 3 months late, or never reported. An ATO estimate counts as never reported | Only paying the debt in full |
A single notice can cover several periods, and some may have been reported on time while others were not. If you are not sure which you have, your accountant can compare lodgement dates with due dates quickly. Do that on day one, because every decision after it depends on the answer.
The four ways out of a non-lockdown DPN
If the debt was reported on time, the penalty is remitted if one of these happens within the 21 days:
- The company pays the debt in full. The cleanest outcome. The company keeps trading, the directors keep control, and nobody else is appointed.
- An administrator is appointed. A voluntary administrator takes control of the company to work out whether it can be saved.
- A small business restructuring practitioner is appointed. Open to companies with liabilities of no more than $1 million. Directors keep control, a restructuring plan is put to creditors within 20 business days, and creditors vote on it (ASIC).
- The company begins to be wound up. It remits the penalty, but it is the end of the company.
A payment plan does not remit it
This trips up a lot of directors. You ring the ATO, agree a payment plan, and assume the notice has gone away. It has not. A payment plan is not one of the four ways out, so the penalty is not remitted. A plan may still be the right decision for the company, but go into it knowing it does not take the personal risk off you.
Why a lockdown DPN makes speed matter
With a lockdown DPN there are no options to weigh up. Administration, restructuring and winding up do not remit it. Only paying the debt in full does.
That turns the problem into a straight funding question with a hard deadline. Once the 21 days pass, the ATO can start recovery against you personally. And the debt keeps growing while you decide: the general interest charge (GIC) is 11.51% a year for October to December 2026, it compounds daily, and it is not tax deductible for income years starting on or after 1 July 2025 (ATO).
The practical point is simple. Settling a loan takes days, not hours, once you count valuations and signatures. A director who starts on day 2 has room to fix a problem. A director who starts on day 18 is relying on nothing going wrong.
A director with property equity and a clear way to repay usually has a real answer here. A director without either should read the section on insolvency advice before borrowing anything.
Funding the payout from property equity
When the answer is to pay in full, the fastest money is usually the equity in property you already own. A second mortgage sits behind your existing home loan and leaves it untouched. In Victoria the same loan is written as a caveat loan: a caveat is lodged so the funds can move quickly, and the second mortgage is registered behind it. Everywhere else the loan settles straight onto a registered second mortgage.
- Speed. Funded in as little as 24 hours. The median across our property-secured loans is 36 hours to funds.
- Size. $20,000 to $5M, against residential, commercial or industrial property.
- No financials. No tax returns or financial statements. Overdue lodgements do not stop it, which matters because a company with a DPN often has some.
- ATO debt and bad credit considered. The debt is the reason for the loan, not a reason to decline it.
- Unencumbered property. If the property has no mortgage, a first mortgage is generally the lowest-cost option.
Every loan is assessed on two things: the equity, and the exit, meaning how the loan gets repaid. A property sale, a refinance to a bank once the ATO debt is gone, or a contracted payment all count. There is more on how lenders view tax debt in our guide to getting a business loan with an ATO debt. If the ATO has also gone to your bank, read what to do about an ATO garnishee notice.
When to call an insolvency adviser instead
A loan is the wrong answer when it only moves the problem. If the company cannot pay its debts as they fall due, if there is no realistic exit for the loan, or if the ATO is one of several creditors chasing the same thin cash flow, borrowing against your home to pay the company’s tax swaps a company debt for a secured personal one.
In that situation, speak to a registered insolvency practitioner before day 21, not after. For a non-lockdown DPN, appointing an administrator or a small business restructuring practitioner inside the 21 days is itself a way out, but only inside the 21 days. The adviser can tell you which route protects you and the business best, and whether funding a restructure makes more sense than a straight payout.
The test we apply to every DPN file is the same: is there a dated event that repays the loan? If yes, funding the payout is usually the cleanest way through. If no, the honest answer is advice first, and we will say so.
An example 21-day timeline
Take a director of a building company who receives a lockdown DPN for $180,000 of PAYG withholding and GST, and who owns a home with good equity. This is an illustrative example of how the 21 days can be used, not a promise of any outcome.
| Day | What happens |
|---|---|
| Day 0 | DPN issued and posted to the director’s ASIC-registered address |
| Day 2 | Notice opened. Director calls the accountant, confirms it is lockdown and pulls the ATO statement of account |
| Day 3 | Short call with an insolvency adviser: the business is viable with work booked, so paying in full is the plan |
| Day 3 | Eligibility check done; property details, ATO balance and exit sent the same afternoon |
| Day 4 | Desktop valuation, written offer, documents signed electronically |
| Day 5 | Loan settles and the funds are paid to the ATO |
| Days 6–8 | Accountant confirms the payment has been applied to the company’s account |
| Day 21 | The date the ATO could have started recovery against the director. By now it is just a date |
What to have ready
- The DPN itself, with its issue date.
- An ATO statement of account for the company, showing the current balance including interest.
- Lodgement history, so lockdown or non-lockdown can be confirmed.
- Property details: the address, who is on the title and the current balance of any existing loan.
- The exit: how the loan will be repaid, in one or two sentences.
Check if you can clear it inside the 21 days
Every day of the 21 you spend undecided is a day you cannot use to settle a loan. If paying in full is the answer, start now. Urgent business loans secured by property can fund in about a day, and our 24-hour business loans page explains what that takes in practice. If the DPN is part of a wider tax debt, see also when the ATO reports business tax debts to credit agencies.
Our 60-second eligibility check makes no credit enquiry and costs nothing. Put in the amount on the notice and the date it was issued, and you will know quickly whether your property can cover it before the 21 days run out.
Frequently asked questions
Where does the ATO send a director penalty notice?
It is posted or left at your address as shown on the ASIC register. Keep that address current, because the 21 days run from when the notice is issued, not from when you read it.
Does a payment plan stop a director penalty?
No. A payment plan does not remit a DPN. For a non-lockdown notice only the four listed options do, and for a lockdown notice only paying the debt in full does.
Can I borrow against my own house to pay the company's debt?
Yes. A loan can be secured on property you own personally and the funds used to pay the company's ATO debt. Everyone on the title has to sign, so check who that is on day one.
Is the interest on the ATO debt tax deductible?
Not for income years starting on or after 1 July 2025. The general interest charge is 11.51% a year for October to December 2026 and compounds daily.
Do I need financials or tax returns to fund a DPN payout?
Not for a property-secured loan. It is assessed on the equity and on how the loan will be repaid, and overdue lodgements do not stop it.
Does it cost anything to apply?
No. There's no cost to apply or check your eligibility. All costs are set out in writing in your loan offer before you sign anything.
Will checking my eligibility affect my credit score?
No. Our 60-second eligibility check doesn't make a credit enquiry. A credit check is only done later, with your consent, if you decide to proceed.
