I got a director penalty warning letter. What now?

What the letter is, and what it is not

The ATO has sent director penalty warning letters in large batches for several years. They are generated from the company's account: overdue PAYG withholding, GST or SGC, or BAS and SGC statements that have not been lodged. The letter usually names the amounts and the lodgements involved, and says the ATO may issue a director penalty notice if things are not fixed.

What it is not:

• It is not a DPN. No personal liability has been enforced yet, and the 21 day remission period has not started.
• It is not a guarantee of a grace period. There is no rule that requires a warning before a DPN, and a notice can follow quickly.
• It is not a scam, usually. Real ATO letters arrive by post or in myGov and ATO online services, and never ask for payment by gift card or to a personal account. If you are unsure, the ATO letter decoder walks through the checks.

The penalty itself already exists in law for any PAYG withholding, GST or SGC that fell due and was not paid while you were a director. The warning letter is the ATO telling you it knows.

What to do now

Three jobs, in this order.

1. Lodge anything outstanding. Unlodged BAS and SGC statements are what turn a penalty into a lockdown penalty that only payment can remit. A BAS lodged within 3 months of its due date keeps the penalty non-lockdown. If a BAS is already more than 3 months late, lodging it now will not change its lockdown status, but it still stops estimates and further penalties.
2. Get the true position. Reconcile the company's ATO account so you know exactly what is owed and for which periods. Check that your address on the ASIC register is current, because a DPN will be posted there.
3. Decide on the debt. If the company can pay, pay. If it can pay over time, an ATO payment plan for the company will stop most enforcement, though it will not remit a penalty once a DPN issues. If the company cannot realistically pay, look at the rescue options now, while an appointment can be made on your timetable rather than inside 21 days.

If you are not sure whether a notice has already gone out, how to check whether a DPN has been issued covers the steps.

If you do nothing

The letter has no deadline of its own, which is why it gets put in a drawer. The risk is what comes next. A DPN posted to your ASIC address starts a 21 day period whether or not you see it, and once that passes an unremitted penalty is enforceable against you personally: refund offsets, garnishee notices, and court proceedings. Directors who act at the warning letter stage generally have the widest set of options and the calmest process. Directors who act at day 19 of a DPN have the narrowest.

What to do next

1. Lodge every outstanding BAS and SGC statement, even where the company cannot pay yet.
2. Confirm your residential address on the ASIC register is current.
3. Work out whether the company can pay, pay over time, or needs a formal option, and get advice on that choice.
4. Keep the letter and note the date. If a DPN follows, the timeline matters.

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