Received a director penalty notice? Your 21 days, explained

A director penalty notice (DPN) changes the stakes. A tax debt that belonged to the company can become a debt you owe personally. The good news is that the notice comes with a window to act, and for many directors fast funding is the cleanest way through it. The important thing is not to spend the first week of those 21 days hoping it will go away.

What does a DPN actually mean?

Under the director penalty regime, company directors can be made personally liable for certain company tax debts — including PAYG withholding, GST and super guarantee charge. The ATO issues a notice to the director, and from there the clock runs.

According to the ATO, directors have 21 days to remit the penalty through one of these options:

• the company pays the amount outstanding in full;
• an administrator is appointed to the company;
• a small business restructuring practitioner is appointed to the company; or
• the company begins to be wound up.

What is the “lockdown” rule?

This is the part that catches people. If PAYG withholding or GST remained unreported for more than 3 months after the due date, the ATO says the director penalty can only be remitted by paying the company’s liability in full. The administration, restructuring and wind-up options are no longer available for those amounts.

Situation	Ways to remit within 21 days
Amounts reported on time (or within 3 months)	Pay in full, administrator, SBR practitioner, or wind-up
PAYG withholding or GST unreported 3+ months after due date	Pay in full only

For many directors in the second row, funding the payment is the only practical way to stay clear of personal liability.

How can the debt be funded within 21 days?

Twenty-one days is plenty of time for a property-secured loan — if you start early.

Option	Speed	Notes
Caveat loan	$20k–$250k possible same day	Short-term, fast, uses property equity
Second mortgage	Same day to a couple of days	Leaves the home loan in place
First mortgage refinance	24–48 hours to a few days	For larger debts; up to $5m possible within 24–48 hours
Unsecured or cash flow loan	Same day possible for smaller amounts	Depends on trading; harder when a tax debt is large

Funds can be paid directly to the ATO at settlement. Because the clock is running, apply straight away and put the DPN date in the form.

What should you do in the first 48 hours?

1. Read the notice carefully and note the date it was issued — the 21 days run from there.
2. Get the numbers. An ATO statement of account showing exactly what’s owed and which amounts the notice covers.
3. Get advice. Your accountant, a registered tax agent or an insolvency professional can confirm which options are open to you.
4. Line up funding. If paying in full is the plan, start the application now; don’t wait until day 18.
5. Bring lodgements up to date. Unlodged BAS can make the position worse and will slow any lender down.

What will a lender ask for?

• The DPN and an ATO statement of account.
• ID for the directors and property owners.
• Property details: address, rates notice and current loan statement.
• Company details and bank statements.
• The plan to repay the loan — business income, a sale, or a later refinance.

A DPN isn’t a deal-breaker for property-secured lenders. They’re used to it. What matters is equity, a clear title and an exit.

What does the delay cost?

GIC keeps compounding daily on the company’s overdue tax, and GIC incurred from 1 July 2025 isn’t deductible. More importantly, once the 21 days pass without remission, the director’s personal exposure becomes real. Compared with that, the cost of a short property loan is often the smaller number.

An illustrative example: the two directors of a Wollongong logistics company receive DPNs for $146,000 of PAYG withholding. Some quarters were reported more than three months late, so the only way to remit the penalty is to pay in full. One director owns a home worth about $1.2m with $520,000 owing. A six-month second mortgage for $150,000, applied for on day two, settles on day four and pays the ATO directly. The company then repays the loan from a large contract payment due in the following months.

Should you pay the debt or restructure?

That’s a question for your advisers, but it helps to understand the trade-off. Paying in full — with your own funds or a loan — keeps the company trading as normal and removes the personal exposure covered by the notice. Appointing an administrator or a small business restructuring practitioner, where those options are still available, can also remit the penalty, but it changes the company’s position significantly and isn’t right for every business.

For a company that’s fundamentally viable and hit by a one-off problem — a large customer failing, a bad quarter — funding the payment is often the cleanest path. For a company that can’t trade its way out, borrowing against a director’s home to pay its debts may simply move the problem into the director’s personal life. Get advice early in the 21 days so the decision is made on facts, not panic.

Act inside the window

If you’ve received a DPN, the next few days matter. Asking costs nothing and doesn’t involve a credit check, your details stay with one team rather than being blasted out, and a real person will help you line up funding while you get advice. Please put the notice date, the amount and the property details in accurately — that’s what makes a fast settlement possible. Apply now.