This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.
The short answer
A director penalty notice (DPN) is the ATO’s formal step to make company directors personally liable for the company’s unpaid PAYG withholding, GST and superannuation guarantee charge. The main options are to pay in full from cash flow, agree an ATO payment plan, or refinance with a property-secured business loan, with early advice from your accountant in every case.
A payment plan spreads the debt but general interest charge keeps accruing and is no longer tax deductible. A refinance clears the ATO balance in one step, replacing it with a short-term loan with a set term and planned exit.
Options for dealing with ATO debt
| ATO payment plan | Property-secured refinance | Paying from cash flow | |
|---|---|---|---|
| How it works | The ATO agrees to instalments over an agreed period | A business loan pays the ATO balance at settlement | The business pays the debt from trading income or reserves |
| Interest | GIC continues to accrue on the unpaid balance and is not tax deductible | Loan interest and fees apply; private lending generally costs more than bank lending | No further GIC once the debt is paid |
| Approval | At the ATO’s discretion; lodgments usually need to be up to date | Subject to the lender’s assessment of the security and exit strategy | No approval needed |
| Effect on collection action | Action is generally paused while the plan is kept; a default can restart it | The ATO debt is paid out, so collection action on that balance ends | Ends once paid in full |
| Security | Generally none, though the ATO may ask for it on large debts | Registered first mortgage over property | None |
| Suits | Smaller debts the business can comfortably service | Larger debts, owners with property equity and a clear exit | Businesses with enough cash to clear the debt without strain |
General information only. Each option depends on the company’s circumstances; speak with your accountant or a registered insolvency adviser before acting.
What is a director penalty notice and which debts does it cover?
Under the director penalty regime, directors can become personally liable for certain company tax debts. A DPN is the notice the ATO issues before it can recover that penalty from a director. It covers three types of company debt: PAYG withholding (tax withheld from wages), GST, and the superannuation guarantee charge (SGC) on unpaid employee super.
A DPN does not cover company income tax. New directors become liable for amounts that were unpaid before their appointment unless, within 30 days of being appointed, the company pays the debt, appoints an administrator or small business restructuring practitioner, or begins to be wound up. Our glossary explains common finance and tax terms.
What is the difference between a non-lockdown and a lockdown DPN?
The type depends mainly on whether the company lodged its BAS and SGC statements on time, even if it did not pay.
- Non-lockdown DPN: issued where the company reported the debts on time. Directors have 21 days from the date the ATO posts the notice to have the penalty remitted by paying the debt in full, appointing an administrator or small business restructuring practitioner, or placing the company into liquidation.
- Lockdown DPN: a DPN is a lockdown notice where PAYG withholding or GST was reported more than 3 months after its due date, or superannuation guarantee charge was not reported by its due date. The penalty then generally cannot be remitted by appointing an administrator or liquidator, only by paying the debt.
- Source: ATO guidance on director penalties. These are general statements of the rules, not advice for your situation.
What is a garnishee notice?
A garnishee notice is a separate collection tool. The ATO directs a third party that owes money to the business, such as its bank or its customers, to pay those funds to the ATO instead. For a trading business this can cut off working capital without warning, so act when the first ATO notices arrive.
What are the main options for dealing with ATO debt?
Most companies choose one of four paths, sometimes combined:
- Pay in full from cash reserves or trading income, if this will not starve operations.
- Agree an ATO payment plan. The ATO may accept instalments, usually if lodgments are up to date. GIC keeps accruing.
- Refinance with a property-secured business loan that pays the ATO in one step. See ATO tax debt funding.
- Get professional advice. Your accountant, and where solvency is in doubt a registered insolvency adviser, can explain whether formal options such as restructuring or voluntary administration are relevant.
Why does the GIC deductibility change matter?
Since 1 July 2025, the ATO general interest charge (GIC) and shortfall interest charge (SIC) are not tax deductible. The full GIC is now an after-tax cost, which makes a long payment plan more expensive than it once was.
Ask your accountant to compare the after-tax cost of each option for your company.
How does a property-secured refinance work with Astro?
Astro Capital Finance provides short-term business-purpose loans secured by a registered first mortgage over property. We lend first mortgage only, with no second mortgages and no caveat loans. Loans range from $50k to $5M, with larger loans considered by exception, over terms of 1 to 24 months. LVR is up to 75% on metro residential property, with regional, commercial, industrial and land assessed case by case. We lend Australia-wide, excluding the Northern Territory.
The loan must be for business purposes, meaning more than 50% of the funds go to business or commercial use; clearing company tax debt falls into that category. We look closely at the exit strategy, such as refinancing to a bank once lodgments are current, selling a property, or repaying from trading. Approval can come in as little as 3 hours, subject to assessment, and settlement in as little as 72 hours, subject to assessment. Low-doc and impaired credit are considered, subject to assessment.
Brokers and accountants can refer clients through our broker page. If the deadline is tied to a property purchase, see urgent settlement finance; for broader options, see business loans and private mortgage finance.
Illustrative example: payment plan or refinance?
Illustrative example only, not a real client. A construction company has lodged its BAS on time but has fallen behind on PAYG withholding and GST after a slow quarter, and its directors receive a non-lockdown DPN. One director owns an investment property with significant equity. Their accountant compares a multi-year ATO payment plan, where non-deductible GIC keeps accruing, with a 12-month property-secured loan that pays the ATO in full at settlement.
The directors choose the refinance because it clears the ATO balance quickly and they have a clear exit: refinancing to a bank once the next financials are complete. A business with a smaller debt and steady cash flow might reasonably choose the payment plan.
What documents are typically needed?
For an ATO debt refinance, we typically ask for:
- A current ATO statement of account (integrated client account) and any DPN or garnishee notices
- Company details, ABN and director identification
- Details of the property offered as security, including any existing mortgage
- How the debt arose and the proposed exit strategy
- Recent BAS or financials where available (low-doc considered)
Frequently asked questions
A DPN allows the ATO to recover the company’s unpaid PAYG withholding, GST or SGC from directors personally. Whether the penalty can be remitted depends on the notice type and timing, so get advice promptly.
Once a DPN has been issued, a payment plan is not one of the four ways the penalty can be remitted: paying in full, appointing an administrator, appointing a small business restructuring practitioner, or winding up the company. The ATO can agree to payment arrangements for the director penalty itself (source: ATO guidance on director penalties). Confirm the position for your company with your accountant.
Yes. Paying company tax debt is a business purpose. Astro lends on a registered first mortgage, and the loan typically pays the ATO directly at settlement. See [ATO tax debt funding](/ato-tax-debt-funding).
No. Since 1 July 2025, GIC and SIC charged by the ATO are not tax deductible, which raises the real cost of carrying ATO debt on a payment plan.
Astro does not hold an Australian Credit Licence because one is not required for business-purpose lending. We are not an AFCA member and have an internal complaints process.
Call 1300 278 761, email loans@astrocapital.com.au (Mon–Fri 8:30am–5:30pm Sydney time) or use our [contact page](/contact).
This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.