What if only one director pays the DPN?
Short answer
If one director pays the full amount, the penalty is satisfied for every director, because each director's liability mirrors the same company debt. Any payment by the company or by any director reduces the penalty for all of them equally. The director who paid may have a right to recover a share from the others, but that is between the directors, not the ATO. See our DPN guide.
How parallel liability works
A director penalty is not divided between directors. Each director is liable for the whole amount, and the ATO can pursue any one of them for all of it. The ATO says it may recover equally from all directors or take each director's individual circumstances into account. In practice, the director with the most reachable assets or income is often the one who hears from the ATO first.
Every payment reduces everyone's exposure. If a company owes $90,000 in PAYG withholding and three directors each hold a DPN for $90,000, and one director pays $30,000, all three now face $60,000. If the company pays the remaining $60,000, all three penalties fall to nil.
| Who pays | Effect on each director's penalty |
|---|---|
| The company | Reduced by the amount paid |
| Any one director | Reduced by the amount paid, for all directors |
| Nobody | Unchanged, and interest keeps accruing on the company debt |
Recovering from the other directors
A director who pays a penalty has a right of indemnity from the company and a right to seek contribution from the other directors. That right exists in the tax law, but the ATO has no part in enforcing it. If your co-director will not pay their share, recovering it means a demand and possibly court action, usually with a lawyer.
Before paying the whole amount to protect yourself, it is worth asking:
- Can the company pay instead? A company payment protects all directors without anyone having to chase anyone.
- Does a co-director have a genuine defence? Defences are personal to each director, so one director's defence does not reduce your liability.
- Is the company still solvent enough that indemnity from it is realistic?
Our company director liability guide covers how personal exposure builds across a board.
Co-directors not paying? Protect your position
A specialist can look at your exposure on its own, whatever the other directors decide.
When directors disagree about what to do
The 21 day window causes real conflict when one director wants to appoint an administrator and another refuses, or one wants to pay and the other cannot. A few things to know:
- Appointing a voluntary administrator or restructuring practitioner is a board decision. A single director on a two-director board cannot usually force it alone.
- A payment plan on the penalty is personal. One director can set one up for their own penalty without the others agreeing, though it does not remit the penalty for anyone.
- Silence from a co-director does not protect you. The ATO can pursue you for the full amount whatever they do.
When directors cannot agree, the practical question is what you can do on your own to limit your personal exposure before the deadline.
What to do next
- Confirm with the ATO the current balance of the penalty after any payments by the company or any director.
- Talk to your co-directors about whether the company can pay, since a company payment protects everyone.
- Get advice on your own position, including a personal payment plan or defence, before relying on anyone else to act.
Related questions
Can the ATO chase only me and not my co-director?
Yes. Each director is liable for the full amount, and the ATO chooses who to pursue. It may treat directors equally or focus on the one with assets or income it can reach. Being pursued first does not change your right to seek contribution from the others afterwards.
Does a co-director's defence reduce my penalty?
No. Defences such as illness or having taken all reasonable steps are assessed for each director separately. If your co-director's defence succeeds, their penalty is removed but yours stays. Only payments by the company or by any director reduce the amount for everyone.
Co-directors not paying? Protect your position
A specialist can look at your exposure on its own, whatever the other directors decide.
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