Resolv Clarity

Director Guide

Resolv Advisory

Work in progress. This guide is not finished: it is a working example, and some sections are still being written. Legal positions were checked against the sources at the end on 24 September 2026. Any feedback is welcome at hello@resolv.au.

Resolv Clarity • Director Guide

What that letter means, and what to do next

When a business is under pressure the paperwork arrives fast: from the ATO, from creditors, from the courts, and later from liquidators. Most of it has a deadline, and the deadline is what decides your options. This guide explains each letter in plain terms, what you are personally exposed to, and the ways through. It is general information, not legal advice, and it is no substitute for talking your own position through.

Call today if

Any one of these means get advice today

Each of these starts a clock or takes money on its own. Do not wait to see whether a second one arrives.

A director penalty notice from the ATO.
A statutory demand served on the company, or a court winding up application.
A bankruptcy notice served on you personally.
A garnishee notice on the company's bank account or a customer.
Wages, PAYG withholding or superannuation that the company cannot pay when due.
A letter from a liquidator or administrator asking for records, a report or money.

The one question

Can the company pay its debts as and when they fall due?

That is the legal test of solvency. It is about cash and timing, not the balance sheet. A company can own more than it owes and still be insolvent if it cannot pay what is due now, and a company with a weak balance sheet can be solvent if it can.

Signs the answer is becoming no

Tax, super or payroll obligations being left unpaid to keep the doors open.
Suppliers moving you to cash on delivery, or chasing overdue invoices.
Activity statements not lodged because there is no money to pay them.
Payment plans with the ATO that keep defaulting.
Directors lending the company money, or not being able to draw a wage.

Why it matters to you: once a company is insolvent, a director who lets it keep taking on debt risks personal claims, and the options narrow the longer it runs. Acting early keeps every option open.

Letters from the ATO

The ATO says it moves to firmer action when a business stops engaging, ignores reminders, keeps defaulting on payment plans, or lets GST, PAYG withholding and super go unpaid. These are the letters that follow.

Deadline: 21 days

Director penalty notice

Makes the company's unpaid PAYG withholding, GST and superannuation guarantee charge a personal debt of each director. The ATO can recover it 21 days after the notice issues, by garnishee, by keeping your own tax refunds, or by legal action.

Non lockdown notice. The notice lists several options. The penalty is remitted if, within the 21 days, the company pays, appoints a voluntary administrator, appoints a small business restructuring practitioner, or begins to be wound up.
Lockdown notice. The notice says only payment remits it. The amounts were reported to the ATO more than three months after they were due (for super, after the super statement's due date). You are already personally liable, and no appointment will remit it.
A payment plan does not remit either kind, and the 21 days keep running while you are on one.

What to do: note the date on the notice and get advice the same week. The right step inside the 21 days can remove a non lockdown penalty altogether.

Usually 21 days to respond

Estimate notice

Where the company has not reported PAYG withholding or super, the ATO can estimate what is owed. The estimate is payable, and director penalties can attach to it.

What to do: the ATO generally allows 21 days, stated on the notice, to give a statutory declaration showing the real figure, and must then reduce or revoke the estimate. Talk to us before the real figures go in: they replace the estimate with the actual debt, and where the periods are more than three months late that debt is locked down.

Takes money straight away

Garnishee notice

Sent to someone who holds or owes money to the company, usually its bank or a customer, requiring them to pay the ATO directly. It keeps operating until the debt is paid or the notice is withdrawn.

What to do: cash flow can stop overnight, so talk to the ATO and get advice immediately. It also tells you the ATO has moved from asking to taking.

28 days to act

Notice of intent to disclose

Where a business has $100,000 or more of tax debt overdue by more than 90 days and is not engaging with the ATO, the ATO can report it to credit reporting bureaus. It sends this notice first.

What to do: paying, or entering a suitable payment arrangement, within 28 days of the notice stops the report. A credit listing can affect the business's access to finance and trade credit.

Must be obeyed

Direction to pay super

An instruction to pay overdue super guarantee charge, or an estimate of it, within a set time. Failing to comply is a criminal offence.

What to do: get advice before the date in the direction. Unpaid super is also where locked down director penalties most often sit.

Other steps the ATO can take include stopping someone with a tax debt from leaving Australia, freezing orders over assets, and requiring security for future tax.

Creditors and courts

Letters from creditors and the courts

Deadline: 21 days, cannot be extended

Statutory demand (served on the company)

A creditor owed at least $4,000 demands the company pay, or reach agreement, within 21 days of service. An application to the court to set it aside must also be made within those 21 days, and that time cannot be extended.

If the company does nothing, it is presumed insolvent and the creditor can apply to have it wound up by the court.

What to do: diarise day 21 and get advice in the first week. If the debt is genuinely disputed, the set aside application has to be filed in time.

Act before the hearing

Winding up application

A creditor's application to the court to put the company into liquidation. Once it is filed, a payment or transfer of the company's property can be void unless the court approves it.

What to do: get advice before paying anyone, including the creditor who filed. There are still options before the hearing date, but fewer every day.

Generally 21 days, check the notice

Bankruptcy notice (served on you personally)

Issued by AFSA at a creditor's request, based on a court judgment of $10,000 or more. You generally have 21 days to pay or reach agreement; AFSA says the period can differ, so read the notice. Not complying is an act of bankruptcy, and the creditor then has six months to apply to the court to make you bankrupt.

What to do: the options are to pay, agree terms with the creditor, or apply to the court to set the notice or the judgment aside. All of them need to happen inside the period on the notice.

Liquidators and administrators

Once a liquidator or administrator is appointed

The appointed practitioner takes control of the company. Your role changes from running it to helping the practitioner, and some of that help is compulsory.

5 or 10 business days

The report on company activities and property, and the books

Directors must give the practitioner a report on company activities and property (ASIC Form 507) within 5 business days in a creditors' voluntary liquidation or a voluntary administration, or 10 business days in a court liquidation or receivership, and hand over the company's books and records.

What to do: do not ignore it. Failing to provide the report or the records is a serious breach and can bring fines. A properly prepared report also shapes how the practitioner sees you from the start.

Reports to creditors

The practitioner reports to creditors on the company's affairs, what happened, and any possible recoveries. As a director you will often receive these too, sometimes as a creditor for money you lent the company.

A demand about a loan account or insolvent trading

A liquidator may write about money a director owes the company (a debit loan account) or about debts incurred while the company was insolvent. Whether a claim goes anywhere usually comes down to what can realistically be recovered and whether the liquidator has funding to pursue it. Where there is something to recover, these matters are commonly settled by negotiation.

What to do: do not pay, admit anything or ignore it. Get advice first; the balance itself often needs checking before it is relied on.

Repaying an ATO payment the liquidator recovers

If a court orders the ATO to hand back a payment the company made before the liquidation towards PAYG withholding, or towards an ATO estimate of withholding or super, each person who was a director at the time must indemnify the ATO for that loss, subject to defences.

Summons to a public examination

A court order to answer questions about the company under oath. Attendance is compulsory. Get advice well before the date.

A letter from ASIC about disqualification

ASIC can ban a person from managing companies for up to five years if they were an officer of two or more companies that failed within seven years and liquidators have reported to ASIC. You are given the chance to respond first.

Your personal exposure

What can become yours personally

A company's debts are usually the company's alone. These are the exceptions that matter, strongest first.

Locked down director penalties

PAYG withholding and GST reported more than three months late, and super guarantee charge reported after its statement due date. You are already personally liable, and only payment reduces it. Liquidating the company does not remove it.

Personal guarantees

A guarantee for a lease, a supplier account, equipment finance or a bank facility lets that creditor pursue you when the company does not pay. Liquidation and small business restructuring do not release guarantees; they only deal with the company's debts.

Non lockdown director penalties

Still personal, but they can be remitted if the company takes one of the listed steps within 21 days of a director penalty notice. Miss the 21 days and they are as fixed as a lockdown penalty.

Loan accounts and insolvent trading claims

Possible, but pursued on what can realistically be recovered. Where there are real assets they tend to be negotiated. They are rarely the driver of personal hardship on their own; guarantees and locked down penalties are.

Where there is more than one director, each is liable for the full director penalty. A payment by any director, or by the company, reduces what the others owe.

The ways through

Which one fits depends on the business, the debts, what you are personally exposed to, and how much time is left on any notice. They are worth understanding before a deadline forces the choice.

Payment plan with the ATO

Pays the debt over time while trading continues. Useful when the business is viable and the debt is manageable. It does not remit a director penalty notice, and a history of defaulted plans makes the next one harder to get.

Small business restructuring

A formal plan to pay creditors part of what they are owed while the directors keep running the business. The company's admissible debts must be under $1 million, employee entitlements including super must be paid, and tax lodgements brought up to date before the plan is put. Plans are usually paid over up to two years.

Voluntary administration

An independent administrator takes control and creditors decide the company's future, often through a deed of company arrangement that can keep the business going. More expensive than a restructure, but available to companies of any size.

Liquidation

The company stops trading, a liquidator sells its assets, pays creditors what the assets allow, and the company is eventually deregistered. Personal guarantees and locked down penalties survive it. The business can be bought back from the liquidator at a value the liquidator accepts, which is legitimate and common.

Safe harbour

Protection from personal insolvent trading claims while directors develop a plan reasonably likely to lead to a better outcome than an immediate appointment. It is only available if employee entitlements are being paid and tax lodgements are up to date, and the director needs evidence of the plan.

Options for you personally

For individual debts: a debt agreement, a personal insolvency agreement, or bankruptcy, each administered through AFSA or a registered trustee. AFSA's temporary debt protection can give breathing space while you decide.

Common mistakes

Common mistakes we see

"A lockdown penalty only happens if nothing was ever reported." Reporting more than three months late locks it down too. For super, one day late is enough.
"We owe less than we own, so we are solvent." Solvency is about paying debts when they fall due, not the balance sheet.
"A payment plan protects me from a director penalty notice." It does not remit the notice, and the 21 days keep running.
"Liquidating the company clears my penalties." Only non lockdown penalties, and only if the company is in liquidation, administration or restructuring, or has paid, by the end of the 21 days after the notice.
"Secured creditors are always paid first." A creditor with security over specific assets is paid from those assets, but employees rank ahead of lenders whose security is over stock and debtors.
"If I resign, it all goes away." You remain liable for amounts that fell due while you were a director.
"The interest the ATO charges is tax deductible." General interest charge incurred from 1 July 2025 is not deductible.

Words you will see

Activity statement: The BAS or IAS a business lodges to report GST, PAYG withholding and instalments.
Administrator: A registered liquidator appointed to take control of a company in voluntary administration.
AFSA: The Australian Financial Security Authority, which runs personal insolvency: bankruptcy, debt agreements and personal insolvency agreements.
ASIC: The Australian Securities and Investments Commission, which regulates companies, directors and liquidators.
Bankruptcy notice: A formal demand to an individual to pay a judgment debt, usually within 21 days.
Circulating security: Security over assets that change in the ordinary course of business, such as stock and debtors. Employees rank ahead of it.
Creditors' voluntary liquidation: A liquidation started by the company's members because it is insolvent, rather than by a court.
Deed of company arrangement: A binding deal between a company and its creditors that comes out of a voluntary administration.
Director penalty notice: The ATO's notice making a director personally liable for the company's unpaid withholding, GST and super guarantee charge.
Estimate: The ATO's own figure for unreported withholding or super, payable as if reported.
Fair Entitlements Guarantee: A government scheme that pays certain unpaid employee entitlements when an employer is liquidated.
Garnishee notice: An ATO notice requiring a third party to pay money owed to you or the company directly to the ATO.
General interest charge: The interest the ATO charges on overdue tax, compounding daily.
Insolvent trading: A company incurring debts while insolvent. Directors can be personally liable for them.
Liquidator: A registered practitioner who winds up a company, sells its assets, investigates and pays creditors.
Lockdown: When unpaid withholding or GST was reported more than three months late, or super guarantee charge after its due date, so only payment clears the director penalty.
Personal guarantee: A promise by you to pay a company debt if the company does not.
Personal insolvency agreement: A formal deal with creditors to settle personal debts without bankruptcy.
Phoenix activity: Moving a business out of a company to leave its debts behind, for less than it is worth. Buying it at market value, or from the liquidator, is not phoenixing.
PPSR: The Personal Property Securities Register, where security interests over business assets are registered.
Proof of debt: The form a creditor lodges to claim in a liquidation or bankruptcy.
Report on company activities and property: The report directors must give an appointed practitioner about the company's affairs, on ASIC Form 507.
Safe harbour: Protection from insolvent trading claims while a director pursues a better outcome plan.
Secured creditor: A creditor with security over some or all of the company's assets.
Sequestration order: The court order that makes a person bankrupt on a creditor's petition.
Small business restructuring: A formal plan for companies with admissible debts under $1 million to pay creditors part of what they are owed while trading on.
Statutory demand: A creditor's formal demand on a company for a debt of at least $4,000, with 21 days to respond.
Unfair preference: A payment to one creditor, before a liquidation, that a liquidator can recover so all creditors are treated alike.
Unsecured creditor: A creditor with no security, such as most suppliers and the ATO.
Voluntary administration: A formal process where an administrator takes control and creditors decide the company's future.
Winding up application: A creditor's application to the court to put a company into liquidation.

Talk it through

Every letter has a clock. Talk to us before it runs out.

We'll walk you through what your letter means and the right next step, in plain English. No obligation.

resolv.au · hello@resolv.au · Resolv Advisory

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Where this information comes from

ATO, Firmer action we may take (last updated 17 September 2026): garnishee notices, director penalty recovery 21 days after issue, disclosure of business tax debts, directions to pay super, departure prohibition orders, freezing orders, securities.
ATO, Disclosure of business tax debts: $100,000 overdue by more than 90 days, not engaging, notice of intent, 28 days.
ATO guidance on estimates: statutory declaration generally within 21 days of the notice of estimate.
ATO PS LA 2011/16, paragraphs 14, 72 to 77: director penalty notices before winding up; director indemnity when a payment to the ATO is set aside.
ASIC, Directors: obligations to external administrators: report on company activities and property within 5 or 10 business days; books and records.
AFSA, I've been served with a bankruptcy notice: generally 21 days, four options; bankruptcy notice requires a judgment of $10,000 or more.
Corporations Regulations 2001 reg 5.4.01AAA: statutory demand minimum of $4,000 from 1 July 2021.
Corporations Act 2001: s 95A (solvency), s 206F (ASIC disqualification), s 459E to 459G and 459C (statutory demands), s 468 (dispositions after winding up begins), s 556 and s 561 (priorities), s 588GA (safe harbour), s 588FGA (director indemnity). Taxation Administration Act 1953 Sch 1 Division 269 (director penalties).
Resolv Advisory practice: how loan account and insolvent trading claims are handled, small business restructuring eligibility and plan terms, and buying a business from the liquidator.