Quick answer
A lockdown director penalty notice covers PAYG withholding or GST that was reported more than three months after its due date, or never reported. For those amounts, the ATO says the director penalty can only be remitted by paying the company's liability in full. Appointing an administrator, entering small business restructuring or liquidating the company won't remove it. That's why, for locked-down amounts, paying — often with funding — is the only clean exit.
Key points
- Triggered when PAYG withholding or GST is reported more than 3 months late, or not at all.
- ATO estimates are treated as amounts that were never reported.
- Only full payment of the company liability remits a lockdown penalty.
- A successful SBR won't remit it; it also survives liquidation.
What makes a director penalty “locked down”?
Every director penalty starts the same way: the company has unpaid PAYG withholding, GST or super guarantee charge, and the ATO issues a notice to the director. What decides whether it’s a standard penalty or a lockdown penalty is when the company reported the amount.
For PAYG withholding and GST, the ATO says that if the unpaid amount is reported more than three months after the due date — or remains unreported — the director penalty can only be remitted by paying the company’s liability in full. Reported within three months, the four standard options are available.
| Reported… | Type | How it can be remitted within the 21 days |
|---|---|---|
| Within 3 months of the due date | Standard | Pay in full, appoint an administrator, appoint an SBR practitioner, or begin winding up |
| More than 3 months after the due date | Lockdown | Only by paying in full |
| Never reported | Lockdown | Only by paying in full |
| ATO estimate raised | Treated as never reported | Only by paying in full (unless corrected) |
Super guarantee charge has its own timing rules for when it falls due, which changed with Payday Super from 1 July 2026. See Payday Super and director risk.
Why don’t insolvency processes help?
This is the point that is most often glossed over in tax-debt marketing. Pages promising to “stop DPNs” with a restructure or liquidation are usually talking about standard penalties. For lockdown penalties:
- Liquidation doesn’t remit them. The company can be wound up and the director is still personally liable.
- Voluntary administration doesn’t remit them.
- Small business restructuring doesn’t remit them. The ATO states plainly that a successful SBR will not remit a lockdown director penalty, or a standard penalty that wasn’t remitted within 21 days.
So a director with locked-down amounts who puts the company into liquidation can end up with no company, professional fees paid from the company’s assets, and the same personal liability as before. That’s why the order of advice matters so much.
Why does funding matter most here?
If payment is the only way out, the only question is how to pay. For most directors, the answer is one of:
- Company cash, if there is any.
- A loan to the company, secured on property the company or a director owns, or unsecured on the company’s cash flow.
- A combination — some cash, some funding, with any income tax left on an ATO plan.
Property-secured loans run from $20,000 to $5,000,000, and funding is possible in as little as 24 hours once the lender has everything it needs. Where arranged, the payment goes straight to the ATO at settlement and is applied to the right periods. Then the director penalty is remitted, and the director’s personal exposure on those amounts is gone. See PAYG withholding debt and BAS and GST debt.
How do you work out what’s locked down?
Ask your accountant or BAS agent to list, for each period with unpaid withholding or GST:
- the due date;
- the date it was actually lodged (or “not lodged”);
- whether the ATO raised an estimate.
Anything reported more than three months late, unreported, or estimated is in lockdown. If you can only fund part of the debt now, ask whether payments can be directed to the locked-down periods first.
What can you still do to prevent future lockdowns?
- Lodge every BAS on time, even if you can’t pay. Reporting within three months keeps future amounts out of lockdown.
- Correct any wrong ATO estimate quickly by lodging accurate figures.
- Pay super with every pay run under Payday Super.
- Keep your ASIC-registered address current so notices reach you.
Are there defences?
The ATO recognises defences for illness, all reasonable steps, and (for SGC and GST) a reasonably arguable position. They’re narrow and fact-specific. If you think one applies, see a lawyer straight away — and don’t let the hope of a defence stop you planning for payment in parallel.
An illustrative example
A director of a fit-out company was told by an unsolicited caller that liquidation would “make the DPN go away”. Her accountant checked the dates: two quarters of withholding had been lodged five months late. Those amounts were locked down. Liquidation would have cost the company its business and left her personally liable anyway. Instead, a second mortgage over a property she owned paid the company’s withholding in full, and the company — which had a healthy order book — kept trading.
What if you only learn about the lockdown after a restructure?
Some directors discover their lockdown exposure only after a restructure or liquidation has begun. If that’s you, get legal advice promptly and look at how the personal liability can be paid.
Talk to a lawyer about your personal position
Because lockdown amounts make the liability yours, it’s worth a short consultation with a lawyer about your personal position — particularly if you hold assets jointly, have given guarantees, or are considering using a family home as security. Paired with your accountant’s figures, that advice lets you make the payment decision with full information.
Is part of your DPN locked down?
If you have a lockdown DPN, the question isn’t whether to pay but how. See if you qualify — no credit check to enquire, no passing your details to a crowd of lenders, and a real person who understands lockdown rules will call you. Bring the notice date and the reporting dates for each period; accurate details let us move fast.
Frequently asked questions
What is a lockdown DPN?
It's a director penalty notice relating to PAYG withholding or GST that the company reported more than three months after the due date, or didn't report. The only way to remit the penalty for those amounts is for the company's liability to be paid in full.
Does liquidation get rid of a lockdown DPN?
No. Putting the company into liquidation remits a standard director penalty if done within 21 days, but it doesn't remit a lockdown penalty. The director remains personally liable.
Does small business restructuring remove a lockdown DPN?
No. The ATO says a successful SBR will not remit a lockdown director penalty, or a standard director penalty that wasn't remitted within 21 days.
How do I know if my DPN is a lockdown notice?
Check when each amount was due and when it was reported. Amounts reported within three months are standard; later or unreported amounts are locked down. The notice itself and your accountant can confirm which applies.
Can a lockdown DPN be paid by instalments?
The penalty is only remitted when the company liability is paid in full. A plan may manage collection, but the personal liability remains until payment is complete. Funding can pay it in one go.
Facts on this page were checked against official sources on 4 October 2026. Rules and thresholds change, so confirm anything critical on ato.gov.au or asic.gov.au.