Director penalty notice funding: options inside the 21 days

The envelope from the ATO with your name on it, not the company’s, is the one directors dread. A director penalty notice (DPN) shifts certain company tax debts onto you personally. It’s serious, it’s time-limited, and for many directors it’s also fixable, provided they work out quickly which kind of notice they hold and where the money can come from.

Start with the date and the type

Two details on the notice decide everything that follows.

The date. You generally have 21 days to act, and the count starts when the notice is given, not when you read it. The ATO posts DPNs to the address recorded for you on the ASIC register. If that’s an old address, or the letter sat in a pile at the office, days have already gone. Work from the date on the notice and assume the clock is running.

The type. DPNs come in two forms, and the difference comes down to whether the company reported its liabilities on time.

	Non-lockdown notice	Lockdown notice
Triggered when	Company lodged its BAS or IAS within three months of the due date	Company didn’t report within that window
Ways to remit within 21 days	Pay the debt; appoint a voluntary administrator; appoint a small business restructuring practitioner; appoint a liquidator	Pay the debt
Does insolvency help?	Yes, if the appointment is made inside the window	No, the personal liability stays
Funding pressure	High	Highest

DPNs can cover PAYG withholding, net GST (and some related taxes) and the super guarantee. Super is in flux: Payday Super took effect on 1 July 2026, so super now falls due around each payday, and it changed how late amounts are assessed. Older quarters still sit under the previous rules. If super is part of your notice, our page on business loans with unpaid super goes into how lenders see it.

Can you just borrow your way out?

For a lockdown DPN, paying is the only exit, so funding becomes the whole question. For a non-lockdown DPN, paying is one of four options, and it’s the only one that keeps the company trading under your control. That’s why many directors of otherwise viable businesses choose to fund it.

A fair word on banks: if the company has a strong history and the DPN arose from one bad quarter, an existing bank sometimes helps, and its pricing is usually the best on offer. In practice, 21 days is short for a bank credit process, and an active DPN makes most banks cautious. That’s normally where non-bank lenders come in.

What tends to work:

1. Caveat loans over property you own. Built for speed and assessed mainly on equity and exit, so a caveat loan is the most common DPN fix when time is tight.
2. Second mortgages. A little slower but often better suited to larger amounts or longer terms. See second mortgage business loans.
3. Home equity loans in the director’s name. When the property is the family home, a home equity business loan can be structured for the business purpose. HomeSec Business Finance, one of our own lenders, works in this space: homesec.com.au.
4. Unsecured lending. Possible for small DPNs if the company’s bank statements are strong, but the ATO debt usually limits amounts and speed.

Not sure your timeline is realistic? Our funding speed calculator gives a rough read, or tell us the notice date and amount and we’ll give you a straight answer.

What happens after you pay?

Paying the DPN discharges the director penalty and the company’s matching debt by the same amount. It doesn’t leave you empty-handed. A director who pays a director penalty generally has a right of indemnity from the company and can seek a fair contribution from the other directors who were liable for the same penalty. If you’re one of several directors and you alone are funding it, get advice on documenting that right before you settle.

From the lender’s side, expect funds to go straight to the ATO at settlement, using the correct payment reference for the company and, where needed, for the director penalty account. Keep the receipt and get an updated statement showing the balance cleared.

Worked example: a lockdown DPN with 14 days left

An illustrative case. A director of a Victorian electrical contracting company receives a lockdown DPN for $96k of PAYG withholding and GST. The company fell three quarters behind on BAS during a family illness, so the debt wasn’t reported in time. ASIC still held a previous residential address, so the letter was redirected and a week of the window had already passed before it was opened.

Their home is valued at roughly $1.25m, with a $610k mortgage. On day 9, a caveat lender issues an approval for $105k over three months, covering the DPN plus fees. Funds settle on day 15, paid directly to the ATO. The director then refinances the caveat into a longer second mortgage after the outstanding BAS have all been lodged and trading has steadied. Without the property, the realistic options would have been much thinner, which is the hard truth about lockdown notices.

Mistakes directors make with DPNs

• Counting from the day they opened it. The deadline is tied to the notice, not the letterbox.
• Assuming a payment plan solves it. It may pause collection, but it doesn’t remit the penalty.
• Resigning to escape. Resigning doesn’t erase a penalty that’s already arisen, and new directors can pick up liability after 30 days in the role.
• Leaving lodgements outstanding. Unlodged BAS can turn future notices into lockdown ones. Lodge, even if you can’t pay.
• Waiting until day 19 to ask about finance. Valuations, title searches and signing take time. Day 3 is a better day to start.

Our director penalty notice glossary entry covers the terms, and the guide on what a director penalty notice means for you goes deeper on the regime.

Holding a DPN? Let’s work out the funding today

Directors facing a DPN need a clear answer quickly, not a sales pitch. We see these notices regularly and know which lenders can realistically settle inside the window, and which will waste days you don’t have.

It’s a one-minute form, and putting your hand up for help leaves your credit score exactly where it was. Your file isn’t shopped around the market, which keeps a flood of cold calls off your mobile while you’re dealing with the ATO. A specialist here reads it and rings you personally. Give us the notice date, the amount and whether it’s lockdown, plus a true figure for the property value and the mortgage balance. Getting those right means our first suggestion is a lender with a real chance of settling before day 21.

Get help funding your DPN →