Received a director penalty notice? Get advice — and know where lending fits — before time runs out.

Treat the notice as a legal deadline, not another reminder

A director penalty notice can expose company directors personally to specified unpaid company tax liabilities. The rules distinguish between penalties that may be remitted through certain actions and “lockdown” penalties where options are more limited.

The notice’s 21-day period generally runs from when it is given, not when you happen to read it. Contact a qualified lawyer and your accountant immediately to confirm the deadline and the options that apply to you.

Where a loan may fit — and where it cannot

If suitable finance can settle the relevant liability, it may form part of a professionally advised response. Approval and settlement cannot be guaranteed within a notice deadline. An application does not pause ATO action.

Do not rely on resignation, a payment plan or the mere promise of funding to resolve personal liability. Your advisers must assess the specific penalty, lodgement history and legal position.

What a director penalty notice (DPN) means, in plain English

A director penalty notice is a formal notice that can make you personally liable for specified unpaid company tax debts, such as PAYG withholding, GST or superannuation guarantee charge. It is one of the most serious documents a director can receive, because it moves the liability from the company to the individual.

The distinction between a standard penalty and a “lockdown” penalty matters enormously, and the compliance window is typically 21 days from when the notice is given — not from when you open the envelope. Treat the date on the notice as a hard deadline until a lawyer confirms otherwise.

It is worth noting that more than one director of the same company can receive a notice relating to the same underlying debt, and each director’s position should be reviewed individually by their own legal adviser where interests differ.

Even if you believe a mistake has been made, the safest approach is still to treat the notice as valid until a lawyer confirms otherwise, rather than risk missing the deadline while disputing it.

Call a lawyer today, then your accountant

This is the one scenario where legal advice should come before any other call. A qualified lawyer can confirm which type of penalty applies, what options remain available, and what the 21-day period means for your specific notice. Your accountant should confirm the underlying figures and lodgement history at the same time.

Do not rely on resignation, informal promises to pay, or a pending loan application as a way of managing personal liability — none of these replace proper legal advice.

Keep a written record of when the notice was received, how it was delivered and any related correspondence — your lawyer will need these details to confirm the compliance timeframe accurately.

Where finance may fit into an advised response

If your lawyer and accountant conclude that paying the relevant liability is part of the appropriate response, suitable finance may help fund that payment. This only works if approval and settlement can realistically occur within the timeframe your advisers have set — and that cannot be guaranteed.

A finance application does not pause ATO action and does not, by itself, change your legal position. It sits alongside professional advice, not ahead of it.

Because timeframes are so tight, it is worth asking a lender early on roughly how quickly they could assess an application, so your legal strategy is built around a realistic picture rather than an optimistic one.

What lenders need to see, and what to prepare

Because of the time pressure, having documents ready can make a genuine difference to how quickly a lender can assess your situation.

Having this material organised before you make contact can shave valuable time off the assessment process when every day of the compliance period counts.

• A copy of the director penalty notice and the date it was given
• Confirmation from your lawyer of the applicable deadline
• ATO statement showing the underlying liability
• Recent business and, where relevant, personal financial information
• Your accountant’s summary of lodgement status

A hypothetical example

Hypothetical only: a director receives a DPN relating to a $40,000 PAYG withholding debt. Their lawyer confirms the notice is not a lockdown penalty and explains the 21-day options, while their accountant confirms the figures. With legal advice guiding the response, the director asks whether a loan to pay the $40,000 could form part of the plan within the remaining timeframe. This example is illustrative only; actual deadlines, amounts and outcomes depend on your notice and advice.

How our tax debt finance team works with you

Our tax debt finance team is led by Kevin Knight, Principal Finance Broker and MFAA Accredited Finance Broker with 20+ years in Australian banking. We can review the finance side of your situation quickly once your legal and accounting advice is in place, so you understand whether borrowing is realistic within your timeframe.

Common mistakes to avoid

The most costly mistake is delaying legal advice while weighing up finance options — by the time a loan is arranged, the 21-day window may have passed. Directors sometimes also assume resigning solves the problem, when penalties can still apply to amounts due before resignation. Others wait for a loan approval before contacting their lawyer at all, which reverses the order that actually protects them.

Questions owners ask

• How long do I have to respond to a DPN? — Generally 21 days from when it was given, but a lawyer must confirm this for your specific notice.
• Can I avoid personal liability by resigning as director? — Not necessarily; resignation does not remove liability for penalties that already applied, so get legal advice first.
• Will applying for a loan stop the ATO acting on the notice? — No, an application does not pause collection action or change the legal deadline.
• Is a lockdown penalty different? — Yes, the options available are generally more limited, which is exactly why legal advice is essential before deciding anything.

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