You’re opening a $48,000 director penalty notice for a restaurant turning over about $20,000 a week. Your 21 days started when the ATO posted it, not when you opened the envelope.
The notice is the step the ATO must take before it can recover director penalties from you personally. The first thing to check is what’s been reported. For GST, that means lodged on your BAS. For PAYG withholding, it means lodged on your BAS or IAS, or sent to the ATO through Single Touch Payroll (STP).
Your options depend on when the company reported each amount. PAYG withholding or GST reported within three months of its due date has four ways out inside the 21 days. Reported later than that, the only way out is paying it in full. That’s why we tell every owner to lodge on time, even in a week when you can’t pay.
What Should You Do First After a Director Penalty Notice?
Send every page to your tax agent today, confirm the posting date and work out how much of the 21-day period remains. Do it before tonight’s service, because the 21 days keep running while you’re on the floor.
The clock starts when the ATO posts the notice or leaves it at the address registered with the Australian Securities and Investments Commission (ASIC). For a current director, the ATO generally sends it to the ASIC-registered address. If ASIC still has an address you’ve moved out of, the notice can sit there while your 21 days run, so update it today.
Have these ready:
- Every page of the notice and its envelope.
- The posting date and the deadline.
- The unpaid PAYG withholding, GST and super guarantee charge amounts.
- Each amount’s due date and when it was reported.
- BAS and other lodgment confirmations.
- The company’s ATO account, payment history and any existing payment plan.
- Each director’s appointment or resignation details and current ASIC address.
The notice lists the unpaid amounts and your remission options. Remission means removing the director penalty, so check those options against each amount.
At Roger, we deal with the ATO as your registered tax agent, review a director penalty notice the same day it arrives and bring in an insolvency adviser or lawyer where the options need one. That ATO debt help comes with our ongoing bookkeeping packages.
What Company Debts Can Become Your Personal Debt?
The ATO can recover unpaid PAYG withholding, GST and super guarantee charge from current or former directors personally.
- PAYG withholding: the tax you take out of every pay run and haven’t paid to the ATO.
- GST: the GST your BAS says the company owes and hasn’t paid.
- Super guarantee charge, or SGC: the charge the ATO assesses when you don’t pay super in full and on time.
When we take over a file, we sometimes find ATO debt parked in the books and forgotten about, or super that went out late or not at all. Check the ATO account and the lodgment dates, as well as the Xero balance.
If the company hasn’t reported, the ATO can estimate the unpaid PAYG withholding, GST or SGC, and director penalties can apply to those estimates. Estimated PAYG withholding and GST are treated as never reported.
How Super Guarantee Charge Is Treated
SGC has its own test. For quarters before 1 July 2026, you get the same four options if the SGC statement was lodged by its due date. If it was lodged late or never, paying in full is the only way out, and an ATO estimate of SGC counts as never reported.
For paydays from 1 July 2026 there’s no super guarantee statement to lodge: the ATO works out the super guarantee charge and sends you a notice of assessment. To keep the four options, the company has to lodge a voluntary disclosure statement for that payday, before the ATO assesses it and within 60 days of the payday. The options then cover the amount in that statement. If the ATO assesses you first, or the 60 days pass, paying in full is the only way out.
What Is a Lockdown Director Penalty Notice?
A lockdown director penalty notice means you can only remove the penalty by paying the company’s debt in full.
Amounts Reported Within Three Months
For PAYG withholding and GST reported within three months of their due date, the four ways out inside the 21 days are:
- The company pays the outstanding amount in full.
- An administrator is appointed to the company.
- A small business restructuring practitioner is appointed.
- The company begins to be wound up.
If a BAS is less than three months overdue, lodge it today, even with the late lodgement penalty on top. Get it in before the three months are up and that amount keeps all four options. They only cover the amount you report, so a BAS that understates the debt leaves the gap locked.
Amounts Reported Later or Never Reported
If you report those amounts more than three months late, or still haven’t reported them after three months, paying in full is the only way out.
The ATO’s own practice statement calls this a lock-down. The penalty stays even if an administrator, restructuring practitioner or liquidator is appointed within the 21 days.
Lodging that overdue BAS today won’t bring the other options back, because the ATO goes by when it was reported. Lodge it anyway, so the ATO is working from your real figures.
Where Restructuring Fits
If the company appoints a small business restructuring practitioner, you keep control of the venue, but ASIC’s Company Register shows publicly that the company is in external administration. The practitioner has to be a registered liquidator.
One test is that the company’s total liabilities can’t be over $1 million on the day the practitioner is appointed. Before it can propose a plan, the company has to pay staff entitlements that are due and lodge its required tax documents, including any late BAS. It doesn’t have to pay the tax debts first, and the proposal period generally runs for 20 business days.
Can One Notice Be Part Locked and Part Not?
Yes. The ATO looks at when each amount was reported, so one notice can have a locked part and a part that still has all four options.
The restaurant turning over about $20,000 a week has two directors. Each receives this $48,000 notice for GST and PAYG withholding:
| Part of the Notice | Amount | When It Was Reported and Your Options |
|---|---|---|
| Quarterly BAS lodged on time but unpaid | $18,000 | All four options remain available within the 21 days. |
| GST on a BAS lodged five months after its due date | $16,000 | Locked; only payment in full removes the penalty. |
| ATO estimate of PAYG withholding for a BAS never lodged, over three months overdue | $14,000 | Treated as never reported, so it’s locked. |
| Locked subtotal | $30,000 | $16,000 + $14,000. |
| Total notice | $48,000 | $18,000 + $30,000. |
| Locked amount against takings of $20,000 a week | 1.5 weeks | Takings, before wages, rent and suppliers. |
That leaves $30,000 you can only clear by paying it in full, and that’s one and a half weeks of takings before you’ve paid a wage, the rent or a supplier. If the company appointed an administrator inside the 21 days, the penalty on the $18,000 could be removed, but each director would still be personally liable for the $30,000 until it’s paid.
There’s only $48,000 to collect in total, not $96,000. Any payment by the company or either director reduces what’s owed for all of you.
PAYG withholding sent through STP within the three months keeps all four options even when the BAS was late, unless the ATO has estimated that amount and the three months have passed. So check every pay run was filed. When we take over a file, we sometimes find pay runs processed but never filed through STP, sometimes for months.
Will a Payment Plan Stop the Notice?
A payment plan isn’t one of the four ways out the ATO lists, so on its own it doesn’t remove the director penalty.
A plan sorts out how the debt gets paid, and we’d help you set up one the venue can keep. The penalty stays until the debt is cleared.
While a formal ATO payment plan covers the debt, the ATO can’t start court action against you for the penalty. The plan doesn’t stop the 21 days though, and if it falls over after they’ve ended, paying in full is the only way out.
Part payments reduce the outstanding balance. Paying the company’s debt in full removes the penalty at any time, but the other three options end with the 21 days.
After 21 days, the ATO can recover the penalty by:
- Applying your tax credits or refunds against it.
- Sending a garnishee notice to your employer or bank, requiring payment to the ATO.
- Starting legal recovery proceedings against you.
For the company’s own ATO debt, the ATO can also send a garnishee notice to the company’s merchant card provider, which means it can take a share of your card takings.
If you’ve already missed an instalment, read what to do after a missed ATO payment plan instalment as well.
Lodge the Next BAS on Time Even If You Can’t Pay
An amount lodged on your BAS within three months of its due date keeps all four options on any later notice. Good hospitality accounting means checking what’s been lodged, because a prepared BAS doesn’t count until it’s in. Keep your BAS due dates beside the payment calendar, so lodging and paying stay two separate jobs.
Can You Avoid the Penalty by Resigning or Relying on Someone Else?
Resigning doesn’t clear what you’re already liable for, and relying on a partner or accountant isn’t a defence.
You can stay liable for amounts that fell due before you resigned, and for later amounts from periods when you were a director. You stay liable after the company is deregistered too.
Being a director on paper while your partner runs the restaurant doesn’t itself protect you. Staying out of the management of the company usually breaches a director’s duty, whether you know it or not.
If You’ve Just Joined the Company
Before you join a venue company as a director, ask to see its ATO account. New directors can become liable for unpaid amounts due before their appointment.
To avoid that, you’ve got 30 days from your appointment to make sure the company pays in full, appoints an administrator or small business restructuring practitioner, or is wound up. Resigning within those 30 days can still leave you liable.
If a Defence May Apply
A defence works differently from the four ways out: if one applies, you’re not liable for the penalty at all. The ATO lists three:
- You took all reasonable steps.
- Illness or another acceptable reason kept you out of managing the company.
- For GST and SGC only, the company applied the law in a way that could reasonably be argued was right, with reasonable care.
A defence has to cover the whole period since the company first had to pay. For illness or another acceptable reason, it must also have been unreasonable to expect you to take part in management.
Your defence goes to the ATO in writing and has to say which of the three you’re relying on. Your tax agent can lodge it through Online services for agents, and the ATO’s director penalty options and defence requirements set out the rest.
Key Takeaways
- Act today and confirm the posting date. Your 21 days start when the ATO posts the notice or leaves it at your ASIC-registered address.
- Check each amount and when it was reported. PAYG withholding and GST reported more than three months late stay locked even after lodgment.
- Separate the locked amounts from the rest, and talk to an insolvency adviser early if an appointment is on the table.
- Treat a payment plan as a way to repay the debt. Part payments reduce the balance; the penalty stays until it’s cleared.
- Keep lodging even when cash is short.
- Resigning or relying on your partner or accountant doesn’t clear what you’re liable for.
If you’d like help with your director penalty notice and getting your ATO lodgments up to date, you can reach us at (02) 9768 5922 or enquiries@getroger.com.au for a free, no-obligations chat.