Could your company ATO debt be putting your personal assets at risk?

The Australian Taxation Office (ATO) is cracking down on debt in 2026, chasing more than $50 billion nationwide. However, there’s one group that racked up the most of it.

Small businesses are linked to $35.9 billion of this debt — an 118% increase over the last seven years. As a result, more than 84,000 director notices have been issued to approximately 64,000 companies in the last financial year alone.

With businesses now required to pay superannuation at the same time as salary and wages, those without a plan may find themselves joining the 1.3 million small businesses in debt.

But for company directors, a director penalty notice is more than a company risk. Once issued, that notice increases their personal risk and exposes their personal assets.

How do you keep both your business and personal assets protected?

In this article, we walk you through:

Small business debt that is on the ATO’s radar
Businesses and industries most exposed and at risk
What to do if you get a director penalty notice
Proactive steps you can take to keep yourself (and your business) protected

What could trigger a director penalty notice and who is liable?

Unpaid tax debt has become a key priority for the Australian government in 2026, with 136% more director penalty notices issued in the last financial year.

But not all business debt is equal, with director penalty notices sent to company directors for outstanding:

Pay as you go (PAYG) withholding tax
Goods and services tax (GST)
Super guarantee charges (SGC)

As a company director, this debt can become a personal liability if the company cannot pay it. This can expose your personal assets, including your house, car and any personal savings.

Businesses most at risk of director penalty notices

While every business with outstanding debt is at risk, industries such as trades, construction and those that use subcontractors heavily need to be particularly careful. This is because of their often tight margins and larger payroll and contractor payment obligations.

While the ATO had been more lenient in prior years, we are also now seeing director notices issued to businesses on active payment plans or with minor delays to payments. Small compliance failures are now also triggering ATO action.

This is where working with a business advisor such as Mead Partners can come in handy. Using forecast, risk and compliance reporting, you can become more aware of debt risks and take proactive measures to stay ahead.

New superannuation obligations could catch a lot of businesses out

From 1 July 2026, you will need to pay superannuation contributions within seven (7) days of salary or wage payments.

For clients with fluctuating cash flows – especially those in building and construction – leveraging forecast and cash flow reporting to ensure these obligations can be met.

However, to get the most value from these reports, it’s essential that you keep your financials up to date. Otherwise, you could be making cash flow decisions with out-of-date information.

What to do if you get a director penalty notice

With only a 21-day deadline, the sooner you can get in contact with the ATO, the more options you have.

Director penalty notices are sent to your registered ASIC address and will list the type of debts owed. It will also tell you the type of director penalty notice that has been issued: a non-lockdown director penalty notice or a lockdown director penalty notice.

The difference between a non-lockdown director penalty notice and a lockdown director penalty notice

A non-lockdown director penalty notice (DPN) is issued within three months of the payable due date.

In comparison, a lockdown DPN is issued after the three-month debt payment due date. With a lockdown DPN, your only option is to pay the debt in full. If the debt cannot be paid, the company debt will become a personal liability to you as a director.

Not sure of your options or what notice type you have? Our business advisors can walk you through it.

Steps to take within your 21-day director penalty notice period

Step 1: Understand your obligations

No matter when you received the notice, your 21-day deadline starts on the issue date.

Your notice will detail what debt is owned, breaking it down by:

Pay as you go (PAYG)
Goods and services tax (GST)
Super guarantee charges (SGC)

We also recommend logging into the ATO Business Portal to confirm:

There are no additional outstanding payments that are due within the next three months
The amounts listed in the notice are the same as your records.

Finding the notice a little confusing? We can step through it together and help you understand your obligations clearly.

Step 2: Assess your options

Depending on the type of notice and the amount of debt owed, your options will be:

Paying amounts in full
Enter an instalment agreement with the ATO
Appointing a small business restructuring practitioner
Appointing a voluntary administrator or liquidator

Feel that you’ve taken reasonable steps to pay the debt, or there is a legitimate reason (such as illness) it has not been paid? You may be able to submit a defence to the ATO for consideration.

Step 3: Contact the ATO

To resolve your penalty notice, you need to contact the ATO and inform them of what action you’ll be taking. This must be completed within the 21-day deadline.

As the notice is issued directly to you as a company director, you can contact the ATO directly or have your accountant contact them on your behalf. Here at Mead Partners, we often manage ATO engagement on behalf of our clients.

Appointing a voluntary administrator or liquidator? They will usually contact the ATO on your behalf. However, it’s best to confirm this process with them directly.

Feeling overwhelmed by your director penalty Notice?

We can step through your notice together. Working side by side, we can assess your options and create an action plan for your business.
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Could your company ATO debt be putting your personal assets at risk