Director Penalty Notices (DPN) and Payday Super - What Changed for Company Directors on 1 July 2026

The Director Penalty Regime, in brief

Where a company fails to pay PAYG withholding, GST or Superannuation Guarantee Charge (SGC) on time,¹ a director becomes personally liable for a penalty equal to that debt.² This liability arises automatically by operation of law the moment the company misses payment. A Director Penalty Notice (DPN) does not create the director's liability as the liability already exists the moment the company misses payment. What the DPN does is give the ATO legal authority to enforce that liability against the director personally, something it cannot do until 21 days after issuing the notice.³

Under certain conditions a director penalty can be remitted, meaning it no longer applies, if the company pays the debt in full or is placed into voluntary administration, small business restructuring, or liquidation, within the relevant period. This is a non lockdown penalty.

Whether a penalty is non lockdown or lockdown turns on the underlying tax debt itself, not on whether the debt was paid. What matters is whether the company lodged the relevant statement within the required timeframe: the Business Activity Statement (BAS) or Instalment Activity Statement (IAS) (within 3 months after the due day), the SGC statement (on or before the due day, with no grace period), or, for super obligations arising from 1 July 2026, a voluntary disclosure statement (before the due day, which is now the earlier of 60 days after the payday or the day the ATO issues its own assessmeGt).⁴ Where lodgement did not happen in time, the penalty becomes a lockdown penalty instead, and only payment in full removes it. Appointing an administrator or liquidator after that point no longer helps.

What Payday Super Changed from 1 July 2026

Under the Treasury Laws Amendment (Payday Superannuation) Act 2025, employers must pay superannuation with wages, so contributions reach an employee's fund within 7 business days of each payday (20 business days for a new employee's first payment).⁵ This replaces the old quarterly cycle, which allowed 28 days after quarter end. Exposure that previously arose four times a year can now arise many times a year, since every pay run is its own compliance event.⁶

Once the 7 business day payment deadline has passed and super remains unpaid, a separate question arises: how does a director avoid the penalty locking down. The old SGC statement regime, which previously gave a fixed lodgment deadline for this purpose, is abolished. The ATO now assesses the SGC itself, largely from real time Single Touch Payroll data, or a company can get ahead of that by lodging a voluntary disclosure statement (VDS).⁷ In place of the old fixed deadline, the due day for director penalty purposes is now the earlier of two triggers: the day after 60 days from the missed payday, or the day the ATO issues its own assessment.⁸ An early ATO assessment can pull the due day well inside the 60 day mark, shortening a director's practical window to act.

Why the Voluntary Disclosure Statement Matters

Lodging a VDS before the ATO assesses the shortfall keeps a penalty non lockdown, and reduces the administrative uplift on the underlying SGC debt.⁹ The core SGC is now tax deductible. What isn't deductible is the cost of being late: interest, which now compounds daily under the general interest charge rather than the old flat 10 percent, and any late lodgment penalty.¹⁰

New Directors and Pre-existing Debts

A director joining a company with existing unpaid PAYG, GST or SGC liabilities is not automatically protected. Liability triggers 30 days after appointment unless, within that period, the company pays the debt, appoints a liquidator, enters voluntary administration, or appoints a small business restructuring practitioner.¹¹ Resigning within those 30 days does not avoid it. Anyone accepting a directorship should check the company's lodgment and payment position with the ATO first.

Statutory Defences

The Taxation Administration Act provides three narrow defences: not taking part in management due to illness or another genuine and compelling reason, taking all reasonable steps to have the company pay or enter external administration, or, for GST and SGC debts after 1 April 2020 only, a reasonably arguable legal position taken with reasonable care.¹² A defence must cover the entire period the debt was outstanding. Lack of funds, director disagreement, or reliance on an adviser or co director do not qualify.

Right of Indemnity and Contribution

Director penalties are joint and several, meaning the ATO may recover the full amount from any one director regardless of how many directors there are. A director who pays more than their share may seek indemnity from the company or contribution from other liable directors, though this is a private matter that does not limit the ATO's ability to pursue any individual director for the full amount first.¹³

Deregistered Companies and Director Penalty Notices

Deregistration does not extinguish DPN exposure. The ATO can issue a notice to a director of an already deregistered company, since registration status has no bearing on debts that arose while it was operating. This creates a practical difficulty for a non lockdown DPN, since remission options like appointing a liquidator require the company to exist, meaning a deregistered company must first be reinstated.

This was the position in Perrin v Australian Securities and Investments Commission.¹⁴ The company had been deregistered for unpaid ASIC fees nearly three years before the ATO issued the director two DPNs, for unpaid SGC and PAYG withholding. Since ASIC's ordinary reinstatement process could not finish inside the 21 day window, the director applied to the Court under section 601AH(2) of the Corporations Act¹⁵ to reinstate the company so a liquidator could be appointed in time. The Court granted the order, and reinstatement occurred with days to spare.¹⁶ The case shows reinstatement can be achieved, not that it always will be, only through an urgent and costly court application. A deregistered company is not a way of avoiding this regime.

What This Means in Practice

• Exposure accrues payday by payday, not quarterly, so irregular cash flow can generate several risk events in a year rather than one per quarter.
• The 60 day window is not a guaranteed grace period. Early ATO assessment can close it sooner.
• Lockdown status turns on timely lodgement, not payment. Always lodge on time even where payment cannot be made.
• A payment plan does not remit a director penalty. Only full payment, or timely external administration for a non lockdown penalty, does that.
• Resigning does not remove liability for penalties accrued while in the role, and a new director can inherit liability for pre existing debts if the company does not act within 30 days.
• Letting a company become deregistered with unpaid tax debts does not resolve the problem, and can make responding to a later DPN significantly harder and more expensive.

How DSA Law helps

When cash flow pressure first shows up in super payments, the window to preserve non lockdown status is short and depends on exactly what was reported and when. Where a DPN has already been issued, we assess whether it is lockdown or non-lockdown, consider whether a statutory defence may apply, and advise on the options available within the 21 day window.

¹ Taxation Administration Act 1953 (Cth) sch 1 s269-10, 269-15

² Taxation Administration Act 1953 (Cth) sch 1 s269-20.

³ Taxation Administration Act 1953 (Cth) sch 1 s269-25.

⁴ Taxation Administration Act 1953 (Cth) sch 1 ss 269-30, s269-10(3).

⁵ Fair Work Ombudsman, Payday Super: New Rules Starting 1 July 2026, 10 December 2025; Treasury Laws Amendment (Payday Superannuation) Act 2025 (Cth).

⁶ Australian Taxation Office, About Payday Super, 9 July 2026.

⁷ Ibid.

⁸ Taxation Administration Act 1953 (Cth) sch 1 s 269-10(3).

⁹ Australian Taxation Office, About Payday Super, 9 July 2026.

¹⁰ Ibid.

¹¹ Taxation Administration Act 1953 (Cth) sch 1 s 269-15(2), 269-20(3).

¹² Taxation Administration Act 1953 (Cth) sch 1 s 269-35.

¹³ Taxation Administration Act 1953 (Cth) sch 1 s 269-45.

¹⁴ Perrin v Australian Securities and Investments Commission [2024] WASC 38 (Strk J).

¹⁵ Corporations Act 2001 (Cth), s 601AH(2).

¹⁶ Perrin v Australian Securities and Investments Commission [2024] WASC 38; Corporations Act 2001 (Cth) s 601AH(2).