Director Liability in Australia
Every Way a Director Can Be Personally Liable in Australia
The corporate veil protects directors from ordinary trading debts. For most ordinary trading it does its job. But personal exposure comes from three directions: what the law imposes on you, what you signed up for and what you did yourself. A director in difficulty is often exposed under several of these at once.
This page maps all three. One point worth knowing up front: if you ever signed a personal guarantee on a lease or a trade account, that liability is yours personally and it survives the company's liquidation. That surprise catches directors every week. Below we start with what the law imposes, then the liability you took on by signing, then the conduct you remain answerable for yourself.
Key Takeaways
- The corporate veil stops ordinary trading debts reaching you. It does not cover everything, and the exceptions are the whole story.
- The law imposes personal liability through several statutory regimes: insolvent trading, directors duties, ATO director penalty notices, Fair Work accessorial liability and criminal wage theft, the Australian Consumer Law and cartel conduct, work health and safety and more.
- Beyond the law, the guarantees and indemnities you signed are liability you took on yourself, and they survive the company's liquidation.
- Section 197 can make the director of a corporate trustee personally liable for the trust's debts. Trading through a trust is not the shield it is assumed to be.
- Some of this cannot be transferred. Pecuniary penalties generally cannot be insured, and some indemnities are prohibited, so part of the exposure stays personally with you.
What the law imposes on you
This is the statutory exposure, and it is what director liability really means. It applies whether or not you agreed to anything. The regimes are grouped below by the body of law that creates them. Scan the category headers, then open the ones that touch your business.
The core of director liability. These regimes catch the conduct of running the company itself.
Insolvent trading
s 588G
Civil penalty plus uncapped compensation to creditors for debts incurred while insolvent.
Breach of directors duties
ss 180-184
Civil penalty; criminal prosecution under s 184 for recklessness or dishonesty.
Creditor-defeating disposition (phoenixing)
s 588GAB
Criminal exposure up to 15 years; creditors and liquidators recover directly.
Director of a corporate trustee
s 197
Personally liable for the trust's debts where the trustee company cannot discharge them and has no full indemnity from the trust assets. This catches anyone trading through a trust with a company trustee.
Defective disclosure documents (prospectus, PDS)
ss 728-729
Personal liability for loss suffered from misleading or deficient disclosure.
Misleading conduct re financial products
s 1041H
Personal liability for loss from misleading or deceptive conduct in relation to a financial product.
Continuous disclosure (listed entities only)
ss 674, 674A and 1317E
For directors of listed entities, personal involvement in a continuous disclosure breach can attract civil penalties. This affects listed entities only and is out of scope for most private company directors.
Director identification number offences
ss 1272C and 1272G
Failing to apply for a director ID, or applying for more than one, is an offence carrying civil and criminal penalties. Minor compared with the regimes above but a standing personal obligation of every director.
Penalty figures move with the Commonwealth penalty unit. Positions stated as at 1 May 2026.
The trap most directors miss
If you trade through a trust with a company as trustee, s 197 can make you personally liable for the liabilities the trustee company incurred as trustee, where it cannot discharge them and is not entitled to a full indemnity from the trust assets. The trust structure is not the shield it is often assumed to be.
Time-sensitive: the ATO 21 day clock
When a company falls behind on PAYG withholding, GST or superannuation guarantee charge, the unpaid amounts accrue as director penalties automatically. The ATO can issue a director penalty notice to your address on the ASIC register, and service is effective on posting whether or not you read it. The notice starts a 21 day clock.
A non-lockdown DPN, where returns were lodged on time, can be remitted by paying or appointing an administrator, small business restructuring practitioner or liquidator inside the 21 days. A lockdown DPN, where the company reported late or not at all, survives those appointments and can only be paid out. After 21 days the ATO can sue you personally, garnishee your accounts and offset your refunds.
Our detailed guides cover the director penalty regime, the statutory defences and the day by day approach to the 21 day window in the Director Liability & ATO Compliance resource centre, including director penalty notices and responding to a DPN in the first 21 days.
What you took on by signing
Beyond what the law imposes, this is the liability you took on yourself by signing. It is contractual, it is usually the largest single number a director faces and every item below survives the company's liquidation. The company failing does not release you.
- Personal guarantees on commercial and retail leases, often for the full remaining term, and on bank facilities, equipment finance and overdrafts.
- Personal guarantees and directors indemnities on supplier trade-credit accounts, frequently signed years ago and forgotten.
- Deeds of cross guarantee across a corporate group, where each company guarantees the others.
- Dividend-access and loan-account undertakings.
What to check: every facility, lease and trade account ever signed personally or as guarantor. Astris reviews these and negotiates caps, sunset clauses and releases, so the exposure is known and contained rather than discovered when the company fails.
Worried an old guarantee still binds you? Talk to us.What you did yourself
The corporate veil never shields a director from their own wrongdoing. Where you commit or direct a wrongful act yourself, you answer for it personally, and the company being a separate legal person makes no difference.
- Personal tort liability where the director personally commits or directs a wrongful act. A director is not shielded for their own torts.
- Accessory liability in equity for knowingly assisting a breach of trust or fiduciary duty, under the Barnes v Addy principles.
- Defamation the director personally publishes.
What you cannot insure or indemnify your way out of
This is the part directors most often get wrong. Some of the exposure above can be passed to insurance or to the company. A meaningful part of it cannot, and knowing which is which is what lets you take sensible steps in advance rather than discovering the gap when a claim lands.
- A company's power to indemnify its directors is limited by s 199A of the Corporations Act. It cannot indemnify against certain liabilities and penalties.
- Section 77A of the Competition and Consumer Act bans a company indemnifying officers for competition penalties, including cartel penalties, and the legal costs of defending them.
- Pecuniary penalties generally cannot be insured against as a matter of public policy, so directors and officers insurance has real gaps.
Know which risks transfer to insurance or the company and which stay personally with you, so you can structure, insure and document in advance rather than find out the hard way.
The Director Liability Guides
Insolvent Trading: A Director's Guide to Section 588G
The duty to prevent insolvent trading, the s 588G(1A) capital transaction trap, the four statutory defences and the safe harbour preconditions. Includes the $10 million Trinco de facto director case.
Australian Director Duties: The Law, The Cases and The Consequences
The duties under ss 180-184, why the business judgment rule rarely saves anyone and the cases from Centro to Storm Financial that show how directors actually get caught.
Can Creditors Sue Directors? Creditor Rights Against Directors in Australia
The pathways creditors use to reach directors personally, from s 588M insolvent trading claims to the zone of insolvency and misleading conduct.
Civil Penalties under the Corporations Act
How the civil penalty regime works, what ASIC actually recovers and the maximum exposure per breach for individual directors under s 1317G.
Frequently Asked Questions
Talk to us
We advise directors on personal liability across all three directions, from reviewing the guarantees you have signed and the regimes that touch your business through to urgent responses when a notice has arrived. Learn more about our Corporate & Commercial practice or get in touch directly.
Contact UsThis page is general information, not legal advice. Astris Law is not a registered tax agent and does not provide tax advice. References to tax law describe the legal framework around director liability only. For tax advice specific to your circumstances, consult your registered tax agent or accountant.