ATO estimates and director penalty notices

If a company has not reported its PAYG withholding, GST or super guarantee charge, the ATO can estimate what it owes, and director penalties can apply to that estimate. A director penalty notice (DPN) based on an estimate is a lockdown notice, because the ATO treats estimated amounts as never reported. That means only payment in full remits it, unless the estimate is reduced or revoked, or a defence applies.

Why estimates matter for directors

• The ATO does not need the company’s figures. It can estimate an unpaid amount from the information it has, such as past lodgements, payments or payroll data. The estimate must be reasonable.
• The estimate becomes a debt. Once the estimate is issued, the ATO can take recovery action, even if you think the figure is wrong.
• Estimates are lockdown. Estimated PAYG withholding and GST are treated as never reported, so administration, small business restructuring or liquidation will not remit the penalty. See lockdown vs non-lockdown DPNs.

How to challenge an estimate

1. Work out the actual amount. Reconstruct the payroll and activity statement figures for each estimated period with your accountant.
2. Lodge the overdue statements. This is needed anyway, and it protects future periods.
3. Ask for the estimate to be reduced or revoked. This is usually done by a statutory declaration, or an affidavit in court proceedings, setting out the actual amount. The law sets out what it must contain, and a false declaration has serious consequences, so get advice before signing.
4. Act quickly. The ATO can recover the estimate in the meantime, and the time allowed to respond can be short.

If the estimate is right, or close to right

A lockdown amount can only be remitted by paying it in full, but every payment reduces both the company’s debt and your penalty. A defence may also apply. For the company itself, administration, restructuring or liquidation may still be the right step even though it will not remit the locked-down penalty. See what happens if you ignore a DPN.

How to avoid estimates

Keep lodging activity statements and reporting super on time, even when the company cannot pay. On-time reporting keeps amounts out of lockdown and reduces the chance of an estimate. New directors should check the lodgement position as soon as they join: see new directors and the 30-day rule.

Common questions

Can the ATO issue a DPN based on an estimate?

Yes. If the company has not reported or paid, the ATO can estimate the amount and director penalties can apply to the estimate.

Is a DPN based on an estimate lockdown?

Yes. The ATO treats estimated PAYG withholding and GST as amounts that were never reported, so a DPN for those amounts can only be remitted by payment in full.

The estimate is too high. What can I do?

The company or director can ask for the estimate to be reduced or revoked, usually by a statutory declaration, or an affidavit in court proceedings, setting out the actual amount. The law sets what it must contain, so get advice before you sign.

Will lodging the overdue BAS cancel the estimate?

Lodging is important, but it does not by itself remove an estimate or turn a lockdown amount back into a non-lockdown one. Ask for the estimate to be reduced or revoked as well.

Sources: Taxation Administration Act 1953 (Cth) Schedule 1, Divisions 268 and 269; Australian Taxation Office, Director penalty regime (last updated 16 April 2026). This page is general information, not advice about your circumstances. Last reviewed: 9 October 2026.