Director penalty notice loans: paying the company's debt inside the 21 days

A director penalty notice is the moment a company’s tax problem becomes a personal one. The letter is addressed to you, not the company. It says you can be made personally liable for the company’s unpaid PAYG withholding, GST or super. And it gives you 21 days. This page explains how that window works, what a lockdown notice changes, and how directors use property to pay in time.

What is a director penalty notice?

A DPN is the ATO’s way of recovering certain company debts from the directors personally. It covers three kinds of unpaid liability:

• PAYG withholding, the tax withheld from wages;
• GST;
• Super guarantee charge (SGC).

Company income tax isn’t on that list. In late 2024 the ATO said that, for businesses that don’t engage or set up a plan for unpaid GST, PAYG withholding or employee super, it would move more quickly to DPNs and garnishees.

Payments count twice in your favour. The ATO says any payment made to either the company’s liability or the director’s liability “will reduce the liability for both equally”.

How long do you have to act on a DPN?

21 days. The detail that catches people is when the clock starts. The 21 days start on the day the ATO posts the DPN or leaves it at the address registered with ASIC. They don’t start on the day you open it. If your ASIC address is an old office or your accountant’s address, some of those days may already be gone.

Within the window, a non-lockdown penalty is remitted if:

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; or
4. the company begins to be wound up.

Options two to four are formal insolvency or restructuring steps with lasting consequences for the company. They’re sometimes the right answer. But a profitable company with a cash-timing problem has another choice: pay the debt and keep trading. If you’re weighing those paths, talk to your accountant or adviser about restructuring options alongside the funding option.

What is the difference between a lockdown and non-lockdown DPN?

It comes down to reporting, not payment. Directors who lodged on time but couldn’t pay are treated differently from companies that didn’t report at all.

	Non-lockdown DPN	Lockdown DPN
PAYG withholding and GST	Reported within 3 months of the due date	Reported more than 3 months after the due date, or not reported
Super guarantee charge	SGC reported by its due date	SGC reported after its due date, or not reported
Ways to remit the penalty	Pay in full, administrator, restructuring practitioner or winding up	Only the company paying the debt in full

That last row is the whole story. With a lockdown DPN, appointing an administrator doesn’t remit the penalty. Only payment does. For many directors, that turns a question about the company into a question about their own balance sheet, and usually their own home.

A note on Payday Super. From 1 July 2026, employers must make sure super guarantee contributions are received by employees’ funds within 7 business days of paying them. The old deadline of 28 days after the end of each quarter no longer applies. Super is now tied to every payday, so falling behind can happen within weeks, not quarters. The ATO’s Payday Super page has the detail.

Can you borrow against your home to pay a DPN?

Yes. It’s one of the most common reasons directors call us. The loan pays the company’s PAYG withholding, GST or SGC in full, which remits the penalty, and is then repaid from a defined exit. It’s a business-purpose loan, because it pays a company’s tax.

How it’s set up depends on whose property it is and where:

• A director’s home in Victoria: usually a caveat loan behind the existing home loan.
• A director’s home in any other state or territory: a short-term registered second mortgage, usually arranged just as quickly.
• Property owned by the company or a family trust: the entity can give security too. See property in a trust or company.

Every owner of the property signs, including a spouse who isn’t a director. That’s often the conversation that takes longest, so have it early. Our page on residential property as security covers the rest.

We lend $20k to $5m, and $20k to $250k is possible the same day. ATO debt is considered case by case. With a 21-day window, aim to enquire in the first week, not the third. Send us the DPN amount and the property details and we’ll tell you quickly whether the timing works.

Illustrative example (round numbers, not a real client). A Sunshine Coast landscaping company falls behind on BAS during a wet season, and some of its PAYG withholding is reported more than three months late. Its two directors receive lockdown DPNs totalling $160,000. Restructuring advice won’t remit a lockdown penalty, so payment is the only path. The directors own a Queenslander worth about $1.2m with $450k owing on it. On day six of the 21 days, we settle a registered second mortgage, and the ATO is paid in full. The loan is repaid from an equipment refinance and a large council contract payment over the following months.

What if the company can’t repay the loan afterwards?

Ask this question before you sign. When a director secures a loan over the family home, the home stands behind it. If the company’s exit fails, the director is still responsible for repaying the loan.

So test the exit honestly:

• Is the company profitable now, with the tax debt caused by a one-off shock: a bad debt, a slow season, a cost blowout?
• Is there a specific source of repayment, such as a sale, a refinance, a contract payment or a retained-earnings plan?
• Are current lodgements and super up to date, so new debts don’t build up behind the loan?

If the answers are yes, borrowing to pay a DPN can protect the company and your personal position at the same time. If they’re shaky, get advice first. The free Small Business Debt Helpline (1800 413 828) is a good place to start, and our tax debt help hub lays out every option. If the deadline is close, see urgent tax debt loans.

A DPN has a date on it — find out where you stand

Directors in your position call us every week, and we don’t treat a DPN as a reason to say no. The enquiry form takes about 60 seconds, and there’s no credit check when you first enquire. Your details come straight to the lender, not to a list of strangers. A real person looks at your property and the notice, then calls you.

Please fill it in accurately: the property address and state, who owns it, the DPN amount and the date on the notice. With 21 days in play, accurate details save the most time.

Check if you can pay the DPN in time →