What happens if you ignore a director penalty notice

If you ignore a director penalty notice (DPN) and none of the remission options is completed within 21 days, the ATO can recover the penalty from you personally. It can offset your personal tax refunds and credits, issue a garnishee notice to your bank or anyone else who holds money for you, or take legal action. An unpaid court judgment can lead to bankruptcy. Ignoring the notice does not make the debt go away, and for non-lockdown amounts it closes off the options that would have cancelled the penalty.

What changes after day 21

Not sure which kind of notice you have? See lockdown vs non-lockdown DPNs. To check your dates, see how to count the 21 days. The 21 days are calendar days, so weekends and public holidays count.

How the ATO recovers a director penalty

The ATO must give you a DPN before it can take action to recover a director penalty. Once the 21 days have passed, it can use these methods:

Every director can be pursued

If the company has more than one director, each director is likely to owe the same amount, and the ATO may recover from any or all of them. Any payment, whether by the company or by a director, reduces the amount owed by everyone.

Resigning does not help either. You remain liable for amounts that fell due while you were a director. See our director penalty notice guide.

What you can still do after the 21 days

Pay, in full or in part

Every payment reduces both the company’s debt and your penalty. Talk to the ATO about your circumstances if you cannot pay in full, but remember that a payment plan does not cancel the penalty.

Raise a defence

The law allows three limited defences: you did not take part in managing the company because of illness or another good reason; you took all reasonable steps to make sure the company paid, appointed an administrator or restructuring practitioner, or was wound up; or, for super guarantee charge and GST, the company treated the law as applying in a reasonably arguable way.

You can ask the ATO to consider a defence at any time. It must be in writing and state which defence you rely on. Timing matters: if you lodge it within 60 days of receiving a garnishee notice, or something in writing showing the ATO has recovered part of the penalty, the ATO’s decision can be reviewed by the courts.

Deal with the company

Appointing a voluntary administrator or liquidator after the 21 days no longer remits the penalty, but it may still be the right step for the company and its creditors. It also stops the company running up new debts while it is insolvent, which limits your exposure to insolvent trading claims.

Look at your personal position

If the penalty is more than you can pay personally, there are formal options for individuals, such as a personal insolvency agreement. Get advice before deciding, because each option has lasting consequences.

Why ignoring it usually makes things worse

• For non-lockdown amounts, it closes off the four options that would have cancelled the penalty.
• Recovery against you can begin without further warning once the 21 days have passed.
• If the company also stops lodging, later amounts become locked down, and only payment in full will cancel those.
• The longer it is left, the fewer options remain for both you and the company.

Common questions

What happens if I ignore a director penalty notice?

Once the 21 days pass without one of the remission options being completed, the ATO can recover the penalty from you personally. It can offset your tax refunds and credits, issue garnishee notices, or take legal action. For non-lockdown amounts, ignoring the notice also closes off the options that would have remitted the penalty.

Can the ATO take money from my bank account?

Yes. A garnishee notice can require your bank, or anyone else who holds or owes you money, to pay it to the ATO instead of to you.

Can I lose my house over a DPN?

A DPN does not give the ATO your house directly. However, if the ATO obtains a court judgment and it is not paid, enforcing that judgment or bankruptcy can put your assets at risk, including your home.

Is it too late to raise a defence after the 21 days?

No. You can ask the ATO to consider a defence at any time, in writing, stating which defence you rely on. If you lodge it within 60 days of receiving a garnishee notice, or something in writing showing the ATO has recovered part of the penalty, the ATO’s decision can be reviewed by the courts.

Will putting the company into liquidation now stop the DPN?

Not for amounts where the 21 days have already passed. Those stay your personal liability unless they are paid or a defence applies. Liquidation or administration may still be the right step for the company.

If there are several directors, who does the ATO pursue?

Each director is likely to owe the same amount, and the ATO may recover from any or all of them. A payment by the company or by any director reduces the amount owed by everyone.

Sources: Taxation Administration Act 1953 (Cth) Schedule 1, Division 269, including sections 269-25, 269-35 and 269-40; Bankruptcy Act 1966 (Cth) section 40; Australian Taxation Office, Director penalty regime (last updated 16 April 2026) and Firmer action we may take (last updated 17 September 2026). This page is general information, not advice about your circumstances. Last reviewed: 9 October 2026.