Received a director penalty notice? How property equity can clear it in time

With a director penalty notice, a company’s tax problem turns into your personal one. Until it arrives, an unpaid BAS is the company’s debt. Once it’s issued, the ATO can pursue you, the director, for the same amount — and the clock is already running.

For directors who own property, there is often a practical way through: use the equity to fund full payment before the deadline. This guide explains how DPNs work, why the type of notice matters so much, and what it takes to get property-secured funds in place inside 21 days.

What does a director penalty notice do?

A DPN is the ATO’s formal warning to a director that certain company debts are now theirs personally as well. The ATO must give you a DPN before it can start recovery action against you for a director penalty. The debts it covers are:

• PAYG withholding the company withheld (or should have withheld) from wages;
• GST the company owes; and
• Super guarantee charge for unpaid employee super.

The ATO describes a director penalty as “a parallel liability”. The penalty mirrors the company’s unpaid amount, so when the company’s debt is paid, the penalty falls away too. Current directors are generally sent the notice at whatever address ASIC has on record for them, so keep it up to date.

The ATO also flagged in late 2024 that businesses which don’t engage on unpaid GST, PAYG withholding and super can expect to move more quickly to firmer action such as DPNs and garnishees. Directors of several related companies may receive DPNs capturing the total across all of them.

How long do you have, and when does the clock start?

You have 21 days, and the ATO is specific: the count begins the day the DPN is posted or delivered to the address ASIC holds for you, not the day you open the envelope. If the letter spends four days in the post and sits in a pile for three more, a third of your time is gone before you’ve read a word.

Day	What should be happening
Day 0	ATO posts the DPN
Days 1–5	Notice arrives; call your accountant; confirm the amounts and which type of notice it is
Days 2–6	Enquire about property-secured funding; gather ID, council rates notices and loan statements
Days 5–12	Letter of Offer issued and accepted; solicitors prepare documents
Days 8–16	Settlement; funds paid directly to the ATO against the company’s account
Days 16–21	Buffer for a delayed signature, a missing payout figure or a public holiday

Those days are illustrative, not a promise. The point is that funding is possible within 24–48 hours for up to $5m once documents are in, and smaller property-secured amounts ($20k–$250k) are possible the same day — but only when the paperwork is ready. Most delays come from the borrower’s side: a co-owner who can’t be reached, a missing loan statement, an unsigned authority.

What’s the difference between a standard and a “lockdown” DPN?

Before anything else, work out which kind of notice you’ve received. The ATO’s rules turn on whether the company reported its obligations on time.

How the debt was reported	Ways the ATO lists to remit the penalty
PAYG withholding or GST reported no later than three months after it fell due	Within 21 days: pay in full, appoint an administrator, begin winding up, or bring in a small business restructuring practitioner
PAYG withholding or GST reported more than three months late, or still unreported	Only full payment of the company’s liability
Super guarantee charge reported on time (by the SGC due date)	Same four options as the first row
Super guarantee charge reported late, or never reported	Again, only full payment of the company’s liability

“Lockdown DPN” is the industry’s shorthand for the second and fourth rows; the ATO doesn’t use the phrase. Note also that amounts the ATO has estimated are treated as never reported. For a director who wants to keep the company trading, a lockdown notice leaves one realistic route: find the money and pay in full.

Why does property equity suit a DPN deadline?

A bank rarely moves inside three weeks, and few banks want to lend to a company with an open ATO debt and a director under notice. A private secured lender looks at different things:

• The equity in the property offered as security.
• A clear exit, such as refinancing to a bank once the ATO is clear, selling a property, or collecting a known business receipt.
• Speed of documents, not years of financials.

Bad credit, ATO debt and past defaults are considered case by case. And because there’s no formal valuation required, no outside report has to be booked and waited on while your 21 days run down. Our page on the fast second mortgage covers what speeds settlement up.

If you’re inside the 21 days now, tell us about the property and the DPN amount today rather than waiting until you’ve exhausted other options.

Whose property can be used, and which structure fits?

The loan is made for the company’s business purpose, but the security doesn’t have to be company property. Common set-ups:

• The director’s own home or investment property, offered as security for the company’s loan. See third-party security for how a security provider signs on.
• Property held in a family trust or another company the director controls. Our page on company or trust-owned property explains the extra documents involved.
• Two or more properties together, where no single one has enough equity.

Structure usually follows speed and what’s already on title:

Structure	When it fits a DPN	Watch for
Caveat loan	Smaller amounts needed in days	Typically short-term; can later convert to a registered second mortgage
Second mortgage	Bank loan on the property is staying in place	First mortgagee’s position and any consent requirement
Private first mortgage	Property is debt-free, or the bank loan is being refinanced anyway	Payout figure from the outgoing bank can take time to obtain

The caveat loans page explains why a caveat can be the quickest of the three.

What does a DPN rescue look like in practice?

Illustrative example: A Wollongong labour-hire company receives a DPN for $240,000 of PAYG withholding and GST, much of it reported more than three months late. The sole director owns a house worth around $1.4m with $600,000 owing to a bank. Illustrative: the director offers the house as security for a $260,000 second mortgage to the company, enough to cover the debt plus the assessment fee, legal and registry costs. Interest is capitalised, so nothing comes out of the company’s account during the term. Settlement happens on day 11 and funds go straight to the ATO. The exit is a bank refinance in month eight, once the company’s lodgements are current and its ATO account is clear.

Three things made it work: the director acted in the first week, the bank loan statement and ID were ready, and the exit was believable because the cause of the debt — a large customer paying late — had already been fixed.

What should you have ready before you enquire?

• The DPN itself, plus the company’s ATO account statement.
• Photo ID for every director and every property owner.
• The latest council rates notice and current loan statement for the property.
• Company details, including the ABN and ACN.
• A one-paragraph explanation of how the debt arose and what has changed.
• Your proposed exit and roughly when it will happen.

Our documents for a private mortgage guide has the full list.

What happens if the 21 days pass?

If the penalty isn’t remitted within the period, the ATO may take recovery action against the director personally. Among its listed firmer actions are garnishee notices, which can be issued to banks, trade debtors and even solicitors, real estate agents or purchasers involved in the sale of property you own. The ATO can also offset your tax credits against director penalties.

Because the two liabilities run in parallel, paying the company’s debt still reduces what you personally owe after day 21, so a missed deadline isn’t the end of the road. But recovery action may already be underway by then, and every extra week adds pressure. If you can’t make the deadline, speak with your accountant or solicitor immediately about the defences and options available.

Key terms at a glance

• DPN: director penalty notice, making a director personally liable for certain company debts.
• Remit: to have the penalty cancelled, for example by the company paying in full.
• Lockdown DPN: industry term for a notice where paying in full is the only remission option.
• Security provider: a person or entity whose property secures someone else’s loan.

Under notice? See if you qualify today

With a DPN, the days you spend deciding are days you don’t have. Send us the DPN amount, the property you can offer, what’s owing on it and how the loan would be repaid. Nothing goes on your credit file when you enquire, and a single specialist reviews it rather than broadcasting it to a crowd of lenders.

Our lending partner fundU lends directly, so the decision and the funding sit in one place. The more accurate your answers about the property and existing debts, the faster you get a firm answer. Check whether your property can fund the DPN payment.