I was only a director on paper for my partner's company. Am I liable?

Why being a director on paper does not help

Many people agree to be a director of a partner's company for a bank, a licence or an ASIC requirement, without ever seeing the accounts. The law treats that consent as an acceptance of the duties that come with it. The ATO's guidance says plainly that it is not a defence to have relied on others, including fellow directors and professional advisers. Courts have taken the same view.

That means not knowing about the debt, never signing a BAS, and never receiving a cent from the business do not, on their own, remove the penalty. Our guide on company director liability explains why directorship is a legal role rather than a title.

The defences that can apply

The statutory defences are narrow, but two are worth looking at closely in this situation:

• Illness or another acceptable reason. This applies if, for the whole of the relevant period, you did not take part in managing the company because of illness or another good reason. Situations involving control, coercion or family violence go directly to whether you could have taken part, and are worth raising with a lawyer rather than assuming they do not count.
• All reasonable steps. This applies if you took all reasonable steps to make the company pay or to put it into administration, restructuring or liquidation, or there were no such steps you could have taken.

Both defences need evidence, and both are judged for the entire period the debt relates to. A defence that covers some quarters and not others reduces the penalty rather than removing it.

What to do now

What usually matters depends on where you are:

1. Still a director, no notice yet. Consider whether to resign, and tell ASIC promptly if you do. Resigning does not remove liability for amounts already due or for periods while you were a director, but it stops new periods being added. The resigned director rules explain what carries over.
2. Notice received. Count the 21 days, find out whether the company can pay or will enter an insolvency process, and get the defence evidence together in parallel.
3. Deadline passed. A payment plan on the penalty, a defence submission, or personal insolvency advice are the remaining paths.

If the relationship has ended, the separate question of who pays tax debt in a divorce can be dealt with in the property settlement, but that agreement binds your ex-partner, not the ATO.

What to do next

1. Check the ASIC register to confirm the dates you were recorded as a director and whether you still are.
2. Write down, with dates, why you could not take part in managing the company and any steps you tried to take.
3. Get advice on whether a defence is realistic and, if a notice has arrived, what can be done inside the 21 days.

More questions: 16 Director penalty notice questions questions answered · Full guide: Director penalty notices