What every director needs to know about ATO debt.
If you’re a director of a company with unpaid PAYG, GST, BAS or super, the personal stakes are higher than most people realise. Here’s what you need to understand — and what you can do about it.
The reality
Your company’s tax debt can become your personal debt.
The most important — and least understood — fact about being a company director in Australia is this: under the Director Penalty Notice (DPN) regime, the ATO can pursue you personally for the company’s unpaid PAYG, GST and superannuation guarantee charge.
That means if your company doesn’t pay, the ATO can take it from your personal assets. Your home, your savings, your car — all on the table. And once a DPN is issued, you have just 21 days to act.
This is why directors need to act early, and why they need advice from someone who is unambiguously on their side.
Personal liability triggers
When directors become personally exposed.
There are five main ways a company tax debt can land on you personally. Most directors are exposed to at least one without realising it.
RISK 01
Director Penalty Notices (DPNs)
If lodgements are up to date but tax remains unpaid, you have 21 days to put the company into administration, SBR or liquidation — or pay the debt. After that, the penalty is locked in personally.
RISK 02
Lockdown DPNs
If returns weren’t lodged within three months of the due date, the DPN is “locked down”. Even putting the company into liquidation will not release you from personal liability — you’ll still owe it.
RISK 03
Personal guarantees
If you’ve signed personal guarantees with suppliers, landlords or banks (most directors have), creditors can pursue you for company debts even after the company is wound up.
RISK 04
Insolvent trading
If you allow the company to incur new debt while it’s unable to pay, you can be personally liable to a liquidator for those amounts under the Corporations Act 2001.
RISK 05
Credit bureau disclosure
Tax debts over $100,000 that are unmanaged can now be disclosed to credit reporting agencies, damaging both the company and director’s borrowing capacity for years.
RISK 06
Bankruptcy by ATO petition
Where a director’s personal liability remains unpaid, the ATO can — and increasingly does — petition for personal bankruptcy.
What to do
If you’re a director under pressure, here’s the order of operations.
1. Don’t wait. Time is the most valuable thing you have.
The single biggest predictor of a good outcome is how early you get advice. Directors who act when their tax debt is small and recent have many more options than those who wait until the ATO has issued garnishees and DPNs. Almost every client we help wishes they had called sooner.
2. Don’t go straight to a liquidator.
A registered liquidator is the right professional if formal insolvency is the right answer — but they cannot tell you whether it’s the right answer, because their statutory duties run to creditors, not to you. Get advice from someone who works for you first.
3. Make sure your lodgements are up to date.
This is critical. The DPN regime treats unlodged returns much more harshly than unpaid ones. If you can’t pay but you can lodge, lodge — it preserves your options enormously.
4. Get advice that’s protected.
Conversations with lawyers can be protected by legal professional privilege. Conversations with accountants and liquidators usually cannot. When you’re discussing exposure, that distinction matters.
5. Understand the full menu of options.
Payment plans, refinancing through specialist tax debt lenders, Small Business Restructuring, voluntary administration, Part 9 Debt Agreements, personal insolvency arrangements — there are many tools, and the right one depends on your specific situation. Don’t let anyone tell you there’s only one path.
The bottom line. If you’re a director with ATO debt — especially if you’ve received a DPN, garnishee, or statutory demand — get advice from someone whose duty is to you, not your creditors. That first conversation should always be free, and it should always come before you walk into a liquidator’s office.