Your director penalty notice says 'lockdown'. What's the difference?

Two types of director penalty with different exits

If unpaid PAYG withholding or GST was reported within three months of the due date, the penalty can be remitted within 21 days if the company pays the amount in full, an administrator is appointed, a small business restructuring practitioner is appointed, or the company begins to be wound up. This is the standard director penalty scenario, and you have negotiation room.

If the unpaid amount is reported more than three months after the due date or remains unreported after three months, the director penalty can only be remitted by paying the company liability in full. For superannuation guarantee charge, if the SGC amounts are reported after the SGC due date or are never reported, the only way to remit the director penalty is to pay the company liability in full, and estimated amounts of SGC are treated as amounts that were never reported. This is the lockdown penalty. Appointing an administrator or liquidator will not help.

Why the reporting deadline controls your options

The difference turns on whether the company reported the liability to the ATO within strict timeframes. For PAYG withholding and GST, three months from the original due date is the cutoff. For superannuation guarantee charge, the SGC statement is due one month after the quarterly super payment deadline. Missing that SGC statement due date means the debt is treated as unreported, and once three months have passed from the original payment due date for a liability that was never reported, you are in lockdown territory.

Construction businesses experiencing payment delays or project cash flow problems often prioritise wages and supplier invoices over tax lodgements. The quarterly super statement feels less urgent than the weekly payroll. That delay is how an unreported SGC debt builds, and once it crosses the three-month mark, the only remission option left is full payment of the company liability.

Source: Official guidance

What the notice will tell you

The notice outlines the unpaid amounts that you are liable for and remission options available to you, and you have 21 days to take one of those options. If the notice confirms that administration or liquidation are available remission paths, you face a standard director penalty. If it states that the only way to remit the penalty is to pay the company liability in full within 21 days, you have received a lockdown notice.

The 21 days starts on the day the ATO posts the DPN or leaves the DPN at the address registered with ASIC, and if the penalty is not remitted within 21 days of the notice, the ATO may take action against you to recover the director penalty amounts. Read the notice carefully on the day it arrives. The clock has already started, and the remission options stated in the notice define what you can and cannot do.

Lockdown means administration will not protect you

A successful small business restructuring will not remit a lockdown director penalty or a standard director penalty that has not been remitted within 21 days of the director penalty notice, as the director penalty liability exists parallel to the liability of the business. The same rule applies to voluntary administration and liquidation commenced after the lockdown period has passed or during the 21-day window for a lockdown notice.

Directors who assume that putting the company into liquidation will clear the personal penalty make a costly error when the notice is a lockdown notice. The legislation is designed to induce directors to lodge outstanding returns or pay liabilities, not simply hand the problem to external administrators. If the reporting deadline has passed and the debt was unreported, your personal liability remains even if the company is wound up.

What to do when a lockdown notice arrives

Within 24 hours, obtain your company's full tax lodgement history showing all filed returns, outstanding lodgements and the dates each statement was due. Confirm whether the liabilities stated in the notice were reported on time, reported late or never reported. This tells you whether you face a standard penalty with multiple remission options or a lockdown penalty with only one. Engage a licensed insolvency practitioner or tax adviser within days, not weeks, to assess whether the company can pay, whether a statutory defence applies, or what your next action should be.

If the company cannot pay the lockdown debt and has no viable future, understand that voluntary administration or liquidation may be appropriate for the company's other creditors but will not remove your director penalty for the lockdown liability. Do not settle or pledge personal assets without legal advice. CRP coordinates independent qualified professionals who can assess your position, clarify the applicable remission rules and help you respond within the 21-day window. Call CRP today for turnaround support tailored to your circumstances.