If you are a company director, you are responsible for ensuring your company reports and pays its tax and superannuation obligations on time. If certain liabilities remain unpaid, the Australian Taxation Office (ATO) can hold you personally liable for amounts such as Pay as you go (PAYG) withholding, Goods and Services Tax (GST) for tax periods starting on or after 1 April 2020, and Super Guarantee Charge (SGC). These personal liabilities are known as director penalties. It is also important to note that if you are appointed as a new company director, you may become personally liable for any unpaid amounts.
Director penalty notices:
If the company fails to lodge the necessary returns within 3 months of its due date (or one month after the reporting date for SGC) and the liabilities remain unpaid, the ATO may issue what’s known as a “Lockdown” Director Penalty Notice (DPN). The only way to resolve this debt is for the company or director to pay the outstanding amounts in full. Appointing a liquidator, administrator restructuring practitioner will not relieve the director from liability.
By contrast, if required returns are lodged on time, but payment is still outstanding, a non-lockdown DPN may be issued, with more remittance options. In this case, to avoid personal liability, the director typically has 21 days to either pay the debt, appoint an external administrator or restructuring practitioner, or commence liquidation.
Given the ATO’s increasing focus on compliance enforcement, they are taking a firmer approach to lodgment extensions and penalty remissions. This makes it more important than ever to prioritise your tax and superannuation obligations.
Key takeaways to avoid director penalties:
- Always treat lodgment deadlines as high priority and lodge on time, even if payment is difficult.
- Pay all PAYG withholding, GST, and super obligations, or set up a payment plan.
- Ensure your address is current with the Australian Securities & Investments Commission (ASIC).
- Before you become a company director, check if the company has any unpaid or unreported PAYG withholding, GST or SGC liabilities.
- If you have any concerns or financial pressure, seek advice early.
If you have questions about your company’s obligations, overdue lodgments, or want to review your compliance, we’re here to help. We take the time to listen and understand your business, guide you through complex tax and statutory requirements, and provide clear financial insights that inspire confident decisions while helping reduce your personal risk.