Liquidation and director penalty notices: is it too late?

Liquidation remits a non-lockdown director penalty notice (DPN) only if the company begins to be wound up within 21 days of the notice. For a creditors’ voluntary liquidation, that means the members must pass the special resolution to wind up within the 21 days. After the 21 days, or for lockdown amounts, liquidation does not remove your personal liability, and that liability continues after the company is deregistered.

How liquidation deals with a DPN

See lockdown vs non-lockdown DPNs and how to count the 21 days. Weekends and public holidays count.

What “begins to be wound up” means

For the penalty to be remitted, the company must begin to be wound up within the meaning of the Corporations Act within the 21 days. In a creditors’ voluntary liquidation, the winding up begins when the members pass a special resolution to wind up the company, with a registered liquidator who has consented to act. Preparing for that, holding the meeting and getting the liquidator’s consent all take time, so start well before the last day.

If a creditor has already filed a winding-up application in court, the company generally cannot resolve to wind up voluntarily without the court’s leave. In that situation, get advice immediately.

When liquidation may be the right option

• The business is no longer viable and cannot be restructured.
• The company cannot pay the amounts on the notice, and directors want an orderly closure.
• Directors want to stop the company incurring new debts while it is insolvent, which limits their exposure to insolvent trading claims.

If the business may still be viable, compare small business restructuring and voluntary administration first.

If the 21 days have already passed

• Your liability stays. Liquidation no longer remits the penalty, and the ATO can recover it from you personally. See what happens if you ignore a DPN.
• Payments still help. Any payment towards the company’s liability, including a dividend from the liquidator, reduces both the company’s debt and your penalty.
• Defences remain available. See DPN defences.
• Liability survives deregistration. The company closing does not end your personal liability.

What the liquidator will look at

A liquidator investigates the company’s affairs and reports to creditors and ASIC. That can include whether the company traded while insolvent, and whether any transactions can be recovered for creditors. Getting advice before the appointment helps directors understand their position.

For how liquidation works more generally, including what directors must do and what the liquidator investigates, see company liquidation in Australia.

Common questions

Does liquidation stop a director penalty notice?

Yes, for non-lockdown amounts, if the company begins to be wound up within 21 days of the notice. For a creditors’ voluntary liquidation, that is when the members pass the special resolution to wind up. It does not remit lockdown amounts.

Is it too late to liquidate after the 21 days?

Liquidation can still go ahead, and may be the right step for the company, but it no longer remits the penalty. You remain personally liable unless the amount is paid or a defence applies.

Does the liquidator’s payment to the ATO reduce my penalty?

Yes. Any payment towards the company’s liability, including a dividend from the liquidator, reduces both the company’s debt and the director penalty.

Am I still liable after the company is deregistered?

Yes. If you are liable for a director penalty, you remain liable after the company is deregistered.

A creditor has filed a winding-up application. Can we still choose a voluntary liquidation?

Generally not without the court’s permission. Once a winding-up application has been filed, the company usually cannot resolve to wind up voluntarily without the court’s leave, so get advice immediately.

Sources: Taxation Administration Act 1953 (Cth) Schedule 1, Division 269; Corporations Act 2001 (Cth) sections 490, 491 and 513B; 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.