Quick answer
A new director has 30 days from appointment to make sure the company pays, or enters administration, restructuring or winding up, for PAYG withholding, GST and super amounts already owing — otherwise they can become liable for those earlier debts. Resigning doesn't erase liability for amounts that arose while you were a director. Before joining a board, check the company's ATO position; before resigning, get advice on what you remain exposed to.
Key points
- New directors: 30 days from appointment to cause one of the remitting outcomes for existing debts.
- Directors can be liable for unpaid amounts that arose while they held office.
- Resigning doesn't remove liability for periods when you were a director.
- Check the company's ATO statement before you accept an appointment.
Why does this matter more than people think?
Directorships change hands all the time in small business. A partner joins to help grow the company. A spouse is added for convenience. A long-time manager is rewarded with a board seat. Someone steps down after a disagreement or to retire. In almost every case, the director penalty regime is the last thing on anyone’s mind — until a notice arrives.
The rules are simple to state, and important to know before you sign a consent to act or a resignation letter.
What is the 30-day rule for new directors?
When you become a director of a company that already has unpaid PAYG withholding, GST or super guarantee charge, the ATO says you have 30 days from your appointment to make sure the company does one of these:
- pays the outstanding liabilities in full;
- appoints an administrator;
- appoints a small business restructuring practitioner; or
- begins to be wound up.
If none happens within the 30 days, you can become liable for director penalties on amounts that were already owing when you joined — even though you weren’t there when the debt arose. That can be a nasty surprise for someone who joined to help.
What should you check before accepting a directorship?
| Check | Why |
|---|---|
| ATO statement of account (all accounts) | Shows what’s owed and how old it is |
| Lodgement status for BAS and super | Late or unlodged amounts may already be locked down |
| Any DPNs, garnishee notices or statutory demands | Tells you how far ATO action has gone |
| Payment plans and whether they’re being met | A plan doesn’t remit director penalties |
| Payday Super compliance since 1 July 2026 | Super is now due with each pay run |
| Other creditors and personal guarantees | The full risk picture |
Have your own accountant review these. If there’s significant debt, agree with the other directors — in writing — how it will be dealt with inside your first 30 days.
Does resigning end your liability?
No. Directors can be liable for the company’s unpaid PAYG withholding, GST and SGC for the periods when they held office. Resigning stops new liabilities accruing to you, but it doesn’t wipe out exposure for amounts that arose while you were a director. The ATO can issue a DPN to a former director.
Two practical points:
- Keep your address current on the ASIC register while you’re a director, and keep records of when you resigned. DPNs are sent to your ASIC-registered address.
- Understand lockdown before you leave. If amounts from your time were reported more than three months late, only payment remits the penalty for those — and leaving doesn’t change that.
What if you were a director in name only?
Some people are appointed directors without any real involvement — often a family member. The ATO recognises a defence where, because of illness or another good reason, you didn’t take part in the management of the company. It’s narrower than many people assume, and “I didn’t know what was going on” is rarely enough on its own. If this is you, get legal advice early rather than relying on the defence.
How can funding help new or departing directors?
- New directors can make “pay in full” the 30-day outcome, keeping the company trading and avoiding inherited liability. A loan to the company, secured on property or sized on cash flow, often makes this possible.
- Departing directors who want a clean exit sometimes agree with continuing directors that the company will clear its director-penalty taxes before or as part of the handover — again, often funded.
Property-secured funding runs from $20,000 to $5,000,000; funding is possible in as little as 24 hours once the lender has what it needs. Where arranged, the ATO is paid directly at settlement.
An illustrative example
Two friends ran a marketing agency. One brought in a third director to lead a new division. Nobody mentioned that two quarters of PAYG withholding were unpaid. The new director’s accountant spotted it in her first week. The company took an unsecured loan, sized on its retainer income, to pay the withholding in full within her 30 days. She joined with a clean slate, and the original directors’ exposure on those amounts was removed too.
What should go in the minutes?
When a director joins or leaves a company with ATO debt, record the position in the board minutes: the ATO balance by account, which amounts carry director penalty risk, any notices received, and the agreed plan to deal with them, including dates. It’s a simple step that protects everyone.
A quick word for family directors
Many small companies have a spouse, parent or adult child on the board for practical reasons. If that’s you, ask for a copy of the company’s ATO statement each quarter and confirm every BAS has been lodged. It takes five minutes, it’s entirely reasonable to ask, and it’s the simplest way to make sure a director penalty never arrives as a surprise. If something looks wrong, raise it early — while every option is still open.
Joining or leaving a board with ATO debt?
If you’re about to become a director of a company with ATO debt — or step away from one — talk to us first. There’s no credit check to enquire, your details stay with one team rather than being forwarded to lenders, and a real person will help you understand whether funding can clear the slate. Please give accurate dates of appointment or resignation and the ATO amounts.
Frequently asked questions
Am I liable for tax debts from before I became a director?
Potentially. A new director has 30 days from appointment to cause the company to pay, appoint an administrator, appoint a restructuring practitioner or begin winding up. If none of these happens, the new director can become liable for director penalties on amounts that were already due.
If I resign, can the ATO still issue me a DPN?
Yes, for unpaid amounts that arose while you were a director. Resignation doesn't remove liability for those periods. The ATO can issue a DPN to a former director.
My spouse put me on as a director. Am I exposed?
A director is a director, whatever the reason for the appointment. The ATO recognises a defence where illness or another good reason meant you didn't take part in management, but it's narrow. Understand the company's position and get advice.
How can I check a company's ATO debt before joining?
Ask the existing directors for the company's ATO statement of account, lodgement status and any notices received, and have your own accountant review them before you accept the role.
Facts on this page were checked against official sources on 4 October 2026. Rules and thresholds change, so confirm anything critical on ato.gov.au or asic.gov.au.