The 21 days run from the notice date.
Written for: Company directors and business owners
A director penalty notice turns a company's tax debt into a personal one. It's one of the strongest tools the ATO has, and it's designed to make directors act quickly.
The notice sets out what's owed and the ways to deal with it. The hard part is time. There are 21 days to act, and they run from the date of the notice, not the day you open it.
Under the director penalty regime, company directors can become personally liable for certain amounts their company hasn't paid: PAYG withholding, superannuation guarantee charge and, since April 2020, GST. A director penalty notice is how the ATO tells a director it can now recover those amounts from them personally.
The reasoning is simple. These amounts were never really the company's money. PAYG withholding belongs to employees, super belongs to staff, and GST was collected on the government's behalf. When they aren't passed on, the law looks past the company to the people running it.
The notice goes to the address the director has recorded with ASIC, and it counts as given once it's posted there, whether or not anyone opens it. A director who has moved without updating ASIC can lose most of the 21 days before they know the notice exists.
Check the date on the notice first, and count 21 days from that date.
Not every notice leaves the same options open. The difference comes down to whether the company reported the amounts on time.
That's why lodging on time matters even when a company can't pay. Reporting keeps the options open.
Speak to your accountant or a qualified adviser straight away. They can confirm which type of notice it is, what's actually owed, and whether any defences apply to your situation.
Don't wait it out. After 21 days, the ATO can recover the penalty from the director personally, including through garnishee notices and by holding back tax refunds.
Work out how it will be paid. A payment arrangement with the ATO may be possible, but on its own it doesn't remove the penalty, and the general interest charge keeps accruing. For many directors, paying the debt out is the cleanest answer, and that's where funding comes in.
Depending on the business and the security available, a private or non-bank lender may be able to fund the debt so it's paid within the 21 days, in some circumstances. These loans are usually short term and priced above bank rates. They replace an open-ended personal exposure with a defined business debt and a plan to repay it.
Time is the constraint. Private lenders can move quickly when the security and the exit are clear, but no lender can promise to settle inside a deadline. The earlier the scenario comes through, the more options there are.
A lender will also look at the rest of the tax position. If there are other ATO debts behind the notice, raise them at the start. See tax debt loans and loans with credit issues.
We work with more than 70 private and non-bank lenders and stay across what they're funding right now. Tell us the amount, the date on the notice and the security, and we'll look at whether a lender in our network can fund it before the deadline, and if not, why.
We aim to be in touch within the hour, and we work alongside your accountant or adviser. We don't give tax or legal advice.
We work on commercial and business-purpose loans only. If you need a home loan, personal loan or any other consumer loan, we'll put you in touch with a broker in our trusted network.
This article is general information only. It isn't financial, credit, tax or legal advice and doesn't take into account anyone's particular circumstances. If you've received a director penalty notice, speak to your accountant or a qualified adviser straight away. Lending decisions are made by the lender.
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