Director penalty notice payment plans: what a plan does — and doesn't — protect

Why do so many directors assume a plan protects them?

Because for most ATO debt, a payment plan is protection. It stops credit-reporting disclosure, reduces the risk of garnishee notices and gives the business breathing room. So when a director penalty notice arrives, it’s natural to think: “I’ll just set up a plan.”

The director penalty regime works differently. It isn’t about collecting a company’s debt over time. It’s about making directors personally responsible for specific taxes the company didn’t pay. A plan changes the timing of collection; it doesn’t change who is liable.

What does remit a director penalty?

Within 21 days of the day the ATO posts the DPN to your ASIC-registered address (or leaves it there), a standard penalty is remitted if the company:

1. pays the liability in full;
2. appoints an administrator;
3. appoints a small business restructuring practitioner; or
4. begins to be wound up.

A payment plan isn’t on that list. For amounts subject to the lockdown — PAYG withholding or GST reported more than three months late, or not at all — only the first option works. See lockdown DPNs.

So is a plan ever useful once a DPN has arrived?

It can be part of the picture, as long as you’re clear about what it does:

Use of a plan	Does it help?
Spreading the company’s income tax debt (not covered by director penalties)	Yes — sensible alongside paying the DPN amounts
Managing collection of DPN amounts while the director remains liable	It manages collection, but the personal liability stays until paid in full
Replacing payment within the 21 days for a standard DPN	No — it doesn’t remit the penalty
Remitting a lockdown penalty	No — only payment in full does

The most common smart structure we see: fund the director-penalty taxes in full, and put the income tax on an ATO plan. That removes the personal exposure while keeping the borrowing as small as possible.

How does funding work within 21 days?

Twenty-one days is enough to arrange property-secured funding if you start straight away:

Days	What happens
1–2	Confirm the DPN date and amounts; check lockdown status; get the ATO statement
2–4	Enquire; first call; choose a structure (caveat loan, second mortgage, unsecured)
4–12	Valuation, ID, documents, existing lender consent if needed
12–18	Approval, loan documents, settlement booked
Before day 21	Settlement — where arranged, the ATO is paid directly; obtain confirmation

Funding is possible in as little as 24 hours for property-secured loans once everything is in place, but the steps before that take real time. Our DPN 21-day calculator gives you your exact deadline.

Who pays — the company or the director?

Usually the loan is made to the company, which pays its own liability, remitting the penalty. In some cases a director borrows personally, using their own property, and pays. Both can work; the structure affects tax treatment and guarantees, so get your accountant’s view. Payments must be directed correctly to the company’s accounts so they’re applied to the right periods.

What if you can’t fund the full amount?

• Fund the locked-down amounts first — they can only be remitted by payment.
• For standard amounts, consider whether one of the other remitting outcomes is genuinely right for the company — with advice from a registered liquidator you’ve checked.
• Remember that the ATO can offset a director’s own tax refunds against director penalties.
• Seek free advice from the Small Business Debt Helpline (1800 413 828) if you’re unsure.

Be careful who you call

The 21-day window is when directors are most vulnerable to rushed advice. Before engaging anyone who promises to “stop” a DPN, ask whether they’re a registered liquidator, registered tax agent or lawyer, how their fee is calculated, and what happens to any lockdown amounts. See questions to ask any adviser.

What happens if the 21 days pass with only a plan in place?

For standard amounts, once the 21 days have passed without one of the four remitting outcomes, the options to remit by administration, restructuring or winding up fall away. From then on, the director penalty can be remitted by payment of the company’s liability. In practice:

• the ATO can pursue the director personally for the penalty;
• it can offset the director’s own tax refunds and credits against it;
• the director remains liable until the company liability is paid, even if a plan is being met.

That isn’t a reason to panic, but it is a reason to treat any plan as a step towards full payment rather than a shield.

How do you combine a plan and funding sensibly?

A practical structure we often see:

1. List the debt by type — GST, PAYG withholding, SGC and income tax.
2. Identify locked-down amounts — these need full payment.
3. Fund the director-penalty taxes with a secured or unsecured loan, paid straight to the ATO where arranged.
4. Put income tax on an ATO plan, online if under $200,000.
5. Set up direct debit for the plan and a tax set-aside account for new BAS.

The result: the personal exposure is gone, the borrowing is as small as possible, and the remaining ATO debt is the kind that doesn’t follow you home.

Want to pay it inside the 21 days?

If you’ve received a DPN and the company is viable, paying is the only path that keeps you in control. Start your enquiry now — there’s no credit check to enquire, your details stay with one team rather than being shared across lenders, and a real person will check your dates first. Please give us the notice date and the amounts as accurately as you can.