Director penalty remission allows directors to avoid personal liability if specific actions are taken within strict timeframes—usually within 21 days of a non-lockdown DPN. This typically requires appointing an administrator or liquidator. If deadlines are missed or lodgements are late, the penalty locks down and remains personally enforceable.
Free Download: Interactive 21-Day DPN Survival Checklist [Get Your Copy]
On This Page
- Introduction
- What Is a Director Penalty Remittance?
- When Can Director Penalties Be Remitted?
- Key DPN Deadlines
- ATO Penalty Triggers
- Statutory Defences & New Director Rules
- Risks and Consequences of Inaction
- How to Reduce the Risk of Director Penalties
- Next Steps
- FAQs
Introduction
In case of a Director Penalty Notice (DPN), remission may allow the director to avoid personal liability for certain company tax debts in specific situations. But there are strict timelines and frameworks to operate within to get a favourable outcome.
Understanding how remission works is critical for directors facing financial pressure. This guide explains when remission may apply and the actions required to rely on it effectively.
What Is Director Penalty Remittance?
Remittance is the formal process of cancelling or “wiping” a director’s personal liability for a company tax debt. While the company may still owe the money, a successful remittance ensures the ATO cannot come after the director’s personal bank accounts, car, or family home to pay for it.
When Can Director Penalties Be Remitted?
Remittance is generally available for ‘Standard’ DPNs (where company debts were reported to the ATO within three months of their due date).
To get remission, you must take one of the following four actions within 21 days of the notice date:
- Pay the debt in full
- Appoint a Small Business Restructuring (SBR) Practitioner
- Appoint a Voluntary Administrator
- Appoint a Liquidator
Important Note: If your company failed to lodge its returns (BAS, IAS, or SGC) within three months of the due date, you may be issued a “Lockdown” DPN. In these cases, options 2, 3, and 4 will not remit the penalty. You will remain personally liable even if the company is liquidated.
Key DPN Deadlines
- The 21-Day Countdown: This begins on the date printed on the DPN, not the day it arrives in your mail. The ATO sends these to the address listed on your ASIC profile. Hence, an outdated address is not a valid excuse for missing the deadline.
- The 3-Month Lodgement Rule: This is the “Lockdown” threshold. To keep your remittance options open, ensure all statements are lodged within three months of being due—even if the company cannot afford to pay the tax yet.
- Immediate Enforcement: Once the 21-day window closes, the debt is your liability. The ATO can begin recovery action (like garnisheeing your wages) immediately without further notice.
ATO Penalty Triggers
The DPN regime focuses on three specific types of debt that the ATO considers “held in trust” for employees or the public:
- PAYG Withholding: Tax taken from employee wages.
- Superannuation Guarantee Charge (SGC): Unpaid compulsory super contributions.
- GST Liabilities: Goods and Services Tax reported via Business Activity Statements.
Statutory Defences and New Director Rules
If the 21-day window has passed, you may still be able to defend yourself from a Director Penalty Notice through Statutory Defences, such as:
- Illness or Incapacity: You were physically or mentally unable to manage the company during the relevant period.
- All Reasonable Steps: You can prove you took every possible step to ensure compliance or to appoint an administrator but were perhaps overruled.
- New Director 30-Day Rule: If you just joined a company, you have a 30-day grace period to address historical tax debts before you become personally liable for them. Always conduct deep due diligence before accepting a directorship.
Note: Statutory defences fail without documentation. They are difficult to prove and require professional guidance early on.
Risks and Consequences of Inaction
Ignoring a DPN is the fastest path to personal financial crisis. The ATO has powers that regular creditors do not.
- Garnishee Notices: They can take money directly from your personal bank account or salary.
- Tax Refund Offsetting: They will keep your personal tax returns to pay down the company’s debt.
- Personal Bankruptcy: Large unpaid penalties can lead to court-ordered bankruptcy, which can end your career as a director.
How to Reduce the Risk of Director Penalties
Prevention is far cheaper than a legal defence. To stay safe:
- Lodge on time: Even if you can’t pay, lodging within the 3-month window prevents “Lockdown” and keeps your options open.
- Update ASIC: Ensure your residential address is current so you don’t miss a 21-day notice.
- Monitor the ATO Portal: Don’t rely on your accountant to tell you there is a problem; check the company’s Integrated Client Account regularly.
Next Steps
Understanding whether a director penalty can be remitted is an important first step after receiving a Director Penalty Notice. Remittance depends on the company’s actions, the type of DPN issued, and whether required obligations were met.
For company directors, the next step is to:
- Confirm the type of Director Penalty Notice issued
- Calculate the exact 21-day response deadline
- Review the company’s BAS, IAS, and SGC lodgement history
- Assess whether remittance options may still be available
- Evaluate possible actions to resolve the company’s tax debt
Taking action quickly is critical. Early action may preserve remittance options and reduce the risk of personal liability.
Seeking professional legal or insolvency advice at this stage can help clarify your position. It can also help determine the most appropriate strategy before enforcement action begins.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, confidential conversation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Does remitting a director penalty remove the company’s tax debt?
No. Remittance removes the director’s personal liability, but the company remains responsible for the underlying tax debt.
Can the ATO refuse a remittance request?
Yes. If the conditions for remittance are not met, such as missing lodgement deadlines, the ATO may refuse to remit the director penalty.
Does remittance apply automatically once the required action is taken?
In many cases, remittance occurs automatically when the qualifying action is taken within the required timeframe, such as appointing an administrator.
Can multiple directors benefit from the same remittance action?
Yes. If the required action is taken, the remittance generally applies to all directors who are subject to the same DPN.
Does remittance still apply if the company later continues trading?
Yes. If remittance occurs through a valid restructuring or administration process, the director’s liability may still be removed even if the company continues operating.
Can remittance apply to older tax debts?
Remittance may apply regardless of when the tax debt arose, provided the conditions for remittance are satisfied within the DPN timeframe.
Can a remitted penalty be reinstated later?
Generally, once a director penalty is remitted under the relevant provisions, it cannot be reinstated for that specific liability.
Does remittance apply to penalties issued by other government agencies?
No. Director penalty remittance applies only to liabilities arising under the ATO’s Director Penalty Notice regime.
Can remittance apply if the company later pays the debt?
Yes. Paying the underlying tax debt may remove the director’s personal liability, effectively achieving the same result as remittance.
Do directors need to notify the ATO to obtain remittance?
Not always. In many cases, remittance results automatically from the action taken, although directors should confirm the outcome with the ATO or their adviser.
