Many small company directors assume that hiring an accountant, calling the ATO and asking for a payment plan is the responsible thing to do when tax debts pile up. It is, but a recent Western Australian ruling shows it will not necessarily shield you personally. A court has ordered the former director of a disability services provider to pay just over $1.16 million in director penalties, plus interest and costs.

The case in brief

The case is Deputy Commissioner of Taxation v Moyo [2026] WASC 434, heard in the Supreme Court of Western Australia by Master Sarah Elizabeth Russell.

Ms Moyo was a director of Excell Disability Services from 1 January 2021 to 21 March 2024. The ATO issued director penalty notices (DPNs) on 24 April 2024, about a month after she stopped being a director.

The Deputy Commissioner won summary judgment of $1,162,184.67. That means the court decided the case without a full trial, because the defence was not strong enough to justify one.

On top of that, the court awarded interest at 6% a year from 5 October 2024 to 29 September 2026, reported as $135,506.91, plus costs.

The penalties covered three types of company debt:

  • PAYG Withholding of $943,245, less a $46,186 credit, leaving $897,059
  • super guarantee charge (SGC) of $249,947.67 across seven quarters
  • GST of $15,178

Together, $897,059 plus $249,947.67 plus $15,178 comes to $1,162,184.67.

The largest part by far was tax withheld from employees' wages but not passed on to the ATO. Unpaid withholding is treated seriously because it is tax already deducted from employees' pay. The Business holds it on their behalf and must pass it on.

Why hiring help wasn't "reasonable steps"

A director can defend a director penalty by showing they took all reasonable steps to make the company pay, appoint an administrator or liquidator, or start winding it up. The defence is in section 269-35(2) of Schedule 1 to the Taxation Administration Act.

The court held that engaging an Accountant or bookkeeper, contacting the ATO and seeking a payment plan were not "reasonable steps" for this purpose.

The court also found that the notices were validly served at the director's ASIC-registered address. The ATO's evidentiary certificates were accepted as prima facie evidence of the debts.

Neither the National Disability Insurance Scheme (NDIS) funding model nor personal hardship was accepted as a defence. Funding pressure, however real, did not change the director's obligations.

How director penalties work

Under long-standing law, directors can become personally liable for a company's unpaid PAYG withholding, GST and SGC.

Once a DPN is issued, a director generally has 21 days to cause the company to pay the debt, appoint an administrator or small business restructuring practitioner, or begin winding up. If the director does one of those things in time, the penalty can be remitted.

That option is lost where the debts were not reported to the ATO within three months of the due date, or, under the old quarterly system, the SGC statement was not lodged on time. These are known as "lockdown" penalties, and they can only be cleared by payment.

Resigning does not escape debts that arose while you were a director. Ms Moyo's notices arrived after she left the board.

Hypothetical example: reported versus unreported debts

Hypothetical example: A company owes $60,000 in PAYG withholding that it reported on time but did not pay. It also owes $20,000 in GST from an activity statement lodged more than three months late. The total is $80,000.

The director receives a DPN. If the director appoints an administrator within 21 days, the $60,000 withholding penalty can be remitted, because it was reported on time.

The $20,000 GST penalty is locked down. Appointing an administrator does not remove it, so the director remains personally exposed for $20,000 even after acting promptly.

If the director does nothing within 21 days, the exposure is the full $80,000.

The ATO has been issuing far more of these notices. DPNs nearly doubled to 64,342 in a year.

The super side is also changing. Under Payday Super, which started on 1 July 2026, the ATO assesses the SGC itself. According to the ATO, penalties are now 25% or 50% of unpaid SGC, depending on prior penalties, compared with a previous maximum of 200%. The seven quarters of SGC in Moyo arose under the old rules.

DPNs can be wrong. The Tax Ombudsman's 2025–26 Annual Report includes a case study of an erroneous DPN that was withdrawn.

What the case means for directors

  • Lodging on time still matters when cash is short. Reporting the Debt keeps more Options open if a DPN arrives.

What to watch

  • Within 21 days of any DPN: the window for most directors to act. Missing it can close off options.
  • 30 June 2027: the end of Payday Super's first year, during which the ATO says it will focus on employers who pay no super or less than the minimum.
  • April 2027: the Tax Ombudsman's review of the ATO's use of DPNs is due.

The lesson from Moyo is that talking to the ATO is not enough on its own, because the law expects action on the company's debts, not just conversations about them.