In 2024–25, the Australian Taxation Office (ATO) issued more than 84,000 director penalty notices (DPNs), a 136% increase from the previous 2023-24 year. A DPN can make a company director personally liable for certain unpaid company debts, including tax withheld from wages, goods and services tax (GST), and employee super.
For directors of Australian crypto companies, these rules can also apply to tax and super obligations arising from crypto-related payments and transactions. This guide explains when the ATO can issue a DPN, what options directors have, and how long they have to act. It also covers the rules around crypto payments, GST and Payday Super, using official ATO guidance throughout.
Key Takeaways
- A DPN makes directors personally liable for unpaid payroll withholding, goods and services tax and super.
- The ATO can recover the penalty from you personally 21 days after it issues the notice.
- Paying staff in crypto does not remove the employer’s withholding and super obligations to the ATO.
- Resigning as a director does not end liability for amounts that fell due before you left.
What Is A Director Penalty Notice?
A director penalty notice tells a director they are personally liable for certain unpaid company amounts. The ATO must give it before it can recover the penalty. It sets out the unpaid amount and the options to remit the penalty. It gives you 21 days to act on those options.
What Debts Create Personal Liability?
A director must make sure the company reports and pays obligations on time. If it does not, the ATO can pursue the director under its director penalties rules. The rules apply to current and former directors alike. Liability arises at the due date. Three types of debt trigger a penalty:
- Pay as you go (PAYG) withholding, which is tax withheld from wages and other payments
- Goods and Service Tax (GST)
- Super guarantee charge (SGC), which applies when required super is not paid on time
The penalty equals the company’s unpaid amount, including amounts the ATO has estimated when the company fails to report. The ATO does not need the company to have lodged correct figures before a director penalty can arise. In some cases, a missed lodgment alone can lead to an estimate and personal liability, making timely lodgment important for both the company and its directors.
How Parallel Liability Works?
A director penalty runs alongside the company’s own debt. The ATO calls this a parallel liability. A payment by the company reduces the director’s liability by the same amount. A payment by a director reduces the company’s debt equally. Each director can owe the full amount at the same time.
This matters most when a company has several directors. The ATO may recover equally from all of them. It may also consider each director’s individual circumstances. No director should assume that another director will settle the debt. Each director remains exposed until the company or a director pays in full.
When Does The ATO Send A DPN Notice?
The ATO must issue a notice before it can take action. It generally posts the notice to the address registered with the Australian Securities and Investments Commission (ASIC). The 21-day period starts when the ATO issues the notice, not when you read it. Keep your registered address current.
The ATO uses firmer action against businesses that ignore reminders or default on payment plans. It also targets businesses that let GST, withholding or super go unpaid. A notice can follow quickly. It may also rest on estimated amounts if the company has not reported. Illegal phoenix activity like when a company deliberately shifts its assets to a new entity and shuts down to dodge its debts can also be a trigger.
Why Are Crypto Businesses Exposed To Director Penalties?
Crypto businesses carry the same obligations as any company that employs staff. A business that exchanges digital currency must register with the Australian Transaction Reports and Analysis Centre (AUSTRAC). Holding pay, revenue or reserves in crypto does not change the ATO’s rules. Exposure arises from payroll, GST and super duties.
Paying Staff In Crypto
A company can pay employees in crypto assets, and the ATO treats the payment as assessable income. The employer must still meet PAYG withholding and super obligations. The employee and employer use the crypto’s Australian dollar market value when received to calculate these amounts. Directors can face penalties for unpaid amounts, even without a cash payment.
GST On Digital Currency
GST treatment depends on who buys the digital currency. Trading with an Australian resident is an input-taxed financial supply, so no GST is charged. Trading with a non-resident is GST-free. A business making GST-free supplies must register for GST if it exceeds the turnover threshold. GST credits may be limited for input-taxed supplies, depending on the financial acquisitions threshold.
Super Under Payday Super
From 1 July 2026, employers must pay super each payday under Payday Super, with payments reaching employees’ funds within 7 business days. The ATO assesses super guarantee charge for each payday, replacing quarterly payments and super guarantee statements. In 2026–27, the ATO will take a supportive approach to employers who pay correctly and quickly fix errors, focusing compliance action on those who do not.
What Can A Director Do After Receiving A Notice?
A director can cause the penalty to be remitted or prove a legal defence. Which route is open depends on when the company reported the debt. Time also sharply limits the remaining choices. Acting inside the 21-day window keeps the most options available. Waiting can close several of them permanently.
Remission Within 21 Days
Remission is available if the company reported the debt in time. For withholding and GST, that means within 3 months of the due date. Each remission option ends the personal liability for that debt. The penalty is remitted within 21 days of the notice if any of the following happens:
- The company pays the amount outstanding in full
- An administrator is appointed to the company
- A small business restructuring practitioner is appointed to the company
- The company begins to be wound up (within the meaning of the Corporations Act 2001)
Paying the company’s debt remits the penalty at any time, not only in the first 21 days. The other options must happen before or within that 21-day window. Directors should take advice before choosing any insolvency route. Each route has wider consequences for the company, its staff and its creditors.
What Defences Can A Director Rely On?
A director can rely on three statutory defences. Each defence must cover the whole period since the company’s obligation arose. The ATO decides each defence on the evidence. A real record of what the director did carries more weight than general assurances. One defence is enough if it is proved.
Illness Or Another Acceptable Reason
This defence applies where illness or another acceptable reason kept a director from taking part in management. It must also have been unreasonable to expect them to take part, judged objectively against the standard of care and skill directors must meet. In Deputy Commissioner of Taxation v Robertson [2009] NSWSC 597, the court said a director who is consistently inattentive to a company’s affairs is unlikely to succeed with this defence. Strong, dated evidence, such as medical records, is therefore essential.
Taking All Reasonable Steps
This defence applies where the director took all reasonable steps to ensure the company paid the debt in full. It also applies where the director ensured one of the following began instead:
- An administrator was appointed to the company
- A small business restructuring practitioner was appointed
- The company began to be wound up
The defence also applies where none of these steps were actually available to the director. In Roche v Deputy Commissioner of Taxation [2015] WASCA 196, the court held this is an objective test. It asks what a reasonable director in that position knew, or ought to have known, not what that specific director subjectively believed. Relying on fellow directors or advisers to act does not meet it.
A Reasonably Arguable Position For GST And Super Charge
This defence covers GST and super charge only. The company must have taken a reasonably arguable position on the law with reasonable care. A position is reasonably arguable if it is about as likely to be correct as incorrect. PAYG withholding has no matching defence because the amounts are known.
How Can A Director Lodge A Defence?
A director must lodge a defence with the ATO in writing, stating the defence relied on. The ATO can consider it at any time, including before recovery action begins. Directors should act early and keep proof of lodgment.
How To Submit A Defence?
An agent can lodge the defence through Online services for agents, or it can be posted. Include evidence supporting each step relied on. The ATO asks directors with a valid defence to contact it promptly.
Review Rights If The ATO Rejects A Defence
Court review is available only when the defence is lodged within 60 days of a garnishee notice or written recovery advice. A director can also request reasons for the ATO’s rejection.
- New points from PS LA 2011/18: The ATO considers a defence before recovery action and allows directors to request reasons for rejection (paragraphs 73 to 76).
- Courts: The Federal Court of Australia or the Federal Circuit and Family Court of Australia are named in full at first mention.
Who Stays Liable When Directors Change?
Liability depends on when the company’s obligation arose, not when the notice arrives. New directors can inherit earlier unpaid debts, while former directors can remain liable after leaving. The key dates are when the obligations fell due.
New Directors
A new director can become liable for amounts due before their appointment. They can avoid this if, within 30 days, the company takes one of the four remission steps listed above. Checking the company’s ATO position before accepting the role is therefore important.
Resigning within 30 days does not remove the risk. For withholding and GST, the 3-month reporting test starts from the appointment date. This concession does not apply to super guarantee charges due on or after 1 July 2018, so liability can still cover amounts due before appointment.
Resigned Directors
Resigning does not end liability for amounts that fell due before resignation or later amounts relating to a period when the person was still a director. The rules differ by debt type:
- PAYG withholding: Liability can continue if the first withholding event in the reporting period occurred before resignation.
- GST: Liability can continue if the reporting period ended before resignation.
- Super guarantee charge: Liability can continue if the reporting period ended before resignation.
Deregistering the company does not remove a director’s liability. Anyone with an outstanding penalty remains liable after deregistration. Directors planning an exit should resolve outstanding amounts while the company is still registered and consider advice from a registered tax professional.
What Happens If A Director Penalty Is Not Paid?
If a director does not remit the penalty within the 21-day period, and no valid defence applies, the ATO can begin recovery action. It can use more than one recovery method, and the process can ultimately lead to bankruptcy. A director with a valid defence does not have to pay the penalty.
How The ATO Recovers The Amount?
The ATO can recover a director penalty in three main ways. Each method targets a different part of the director’s finances. The methods can run one after another or at the same time. The three methods are:
- Offsetting the director’s tax refunds or credits against the penalty
- Issuing garnishee notices to banks, employers and others who hold the director’s money
- Starting legal recovery proceedings against the director personally in court
Legal Action And Bankruptcy
If a director does not engage, the ATO may file a claim in the relevant state or territory court. Once recognised, the debt can be enforced through a bankruptcy notice, which gives 21 days to pay or agree a plan. Ignoring it may lead to a creditor’s petition and bankruptcy. The ATO will not seek bankruptcy where the person can clearly pay within a reasonable time.
How Can KoinX Help Crypto Company Directors With DPNs?
A crypto company holds volatile assets but owes fixed Australian dollar amounts to the ATO. Directors need to know what the business holds, earned and owes at any given date. Scattered exchange and wallet records make that hard. KoinX turns your transaction history into dated reports calculated under ATO rules.
Transaction History Report
The Transaction History Report works as a full ledger of trades, transfers, rewards and fees. Directors can trace any figure to the transaction behind it. That trail supports accurate reporting. If a notice arrives, it also supplies the evidence a defence needs. It is the raw data behind every report.
Income Summary Report
The Income Summary Report consolidates capital gains, derivatives, income and expenses for a financial year. It shows the crypto position behind the company’s results in one place. Directors can use it to plan for tax and payroll cash needs before they fall due. Seeing everything together highlights cash pressure early.
ATO Complete Tax Report
The Complete ATO Tax Report applies ATO rules to your crypto data. It covers capital gains tax discounts, income, derivatives and detailed portfolio balances. It turns holdings into the figures a tax return needs. Accountants can use it directly when preparing the company’s lodgments. That keeps lodgment figures consistent across periods.
A notice moves quickly, and records built afterwards carry less weight. Set up your company’s transaction history in KoinX now. Review each report and note any gap between your holdings and your books. Pricing starts at A$28.99 for up to 25 transactions, so your first check need not be delayed.
The Tax Ombudsman is reviewing how the ATO issues and administers director penalty notices. It is accepting feedback until 29 September 2026. It expects to publish its report by April 2027. Directors with recent experience of a notice can contribute. Until any change arrives, the current rules apply in full.
Directors cannot delegate personal liability, but they can strengthen their evidence. KoinX builds dated reports of your crypto holdings, income and gains under ATO rules. Sign up and compare them with the company’s books before the next lodgment. Any gap you find now costs far less than one found after a notice.
Frequently Asked Questions
Do Director Penalties Cover Company Income Tax Or Crypto Gains?
No. The regime covers PAYG withholding, GST and super guarantee charge only. Company income tax and crypto gains fall outside it. The ATO can still pursue the company for those debts through other collection actions. Directors also face separate risks, such as insolvent trading and, in some cases, PAYG withholding non-compliance tax.
Can I Recover A Director Penalty From The Company Or Other Directors?
A director who pays a penalty has a right of indemnity under tax law. It allows recovery from the company or from other directors who are also liable. In a recovery claim, the penalty is not payable if a statutory defence is proved. Directors who pay should keep evidence of what they paid and when.
Does The ATO Send A Copy Of The Notice To My Tax Agent?
It may. The ATO can post a copy to a director’s registered tax agent. That copy supplements the notice sent to the director and does not replace it. The 21 days still run from when the ATO posts or leaves the director’s own notice. The agent can then advise the director on the options.
Can A Director Also Be Liable For Insolvent Trading?
Yes. Under the Corporations Act 2001, directors must prevent the company from incurring debts while it is insolvent. If they fail, a court can order compensation to creditors. The order covers debts incurred while insolvent that liquidation could not recover. This duty is separate from the director penalty regime itself.
