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            "text": "Yes. Under s 550 of the Fair Work Act a person involved in a contravention with actual knowledge of the essential facts faces a personal civil penalty and joint and several liability for the underpayment. Since 1 January 2025 intentional underpayment is also a criminal offence under Part 3-5B of the Fair Work Act, with individuals facing up to 10 years imprisonment and a penalty of the greater of three times the underpayment or $1.65m. The Voluntary Small Business Wage Compliance Code can avoid prosecution where it is followed."
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            "text": "Not necessarily. Section 197 of the Corporations Act can make the director of a corporate trustee personally liable for liabilities the company incurred as trustee where it has not and cannot discharge them and is not entitled to a full indemnity from the trust assets. Trading through a trust with a company trustee does not put you outside personal exposure, and many directors do not realise this until the trust assets fall short."
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            "text": "No. Pecuniary penalties generally cannot be insured against as a matter of public policy, so directors and officers insurance has real gaps. A company's power to indemnify directors is also limited by s 199A of the Corporations Act, and s 77A of the Competition and Consumer Act bans a company indemnifying officers for competition penalties and the legal costs of defending them. The point is to know which risks transfer to insurance or the company and which stay personally with you."
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            "text": "A director penalty notice (DPN) is a notice the ATO issues under Division 269 of Schedule 1 to the Taxation Administration Act 1953 that makes a director personally liable for an amount equal to the company's unpaid PAYG withholding, net GST or superannuation guarantee charge. The director has 21 days from the date of the notice, not the date of receipt, to act before the ATO can commence recovery proceedings against them personally."
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            "text": "A non-lockdown DPN issues where the company reported its liabilities on time, broadly within three months of the due date for PAYG withholding and GST, even though it did not pay. The penalty can be remitted within the 21 day window by paying the debt or putting the company into administration, small business restructuring or liquidation. A lockdown DPN issues where the company reported late or not at all. A lockdown penalty cannot be remitted by appointing an administrator or liquidator. Payment is the only way out, which is why lodgement discipline matters even when the company cannot pay."
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# Director Liability in Australia

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[Home](/)› Director Liability 

# 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

Statutory liability that applies whether or not you agreed to anything.

](#statutory)[

### What you signed up for

Guarantees and indemnities you signed, which survive the company.

](#guarantees)[

### What you did yourself

Your own conduct, where the corporate veil never helps.

](#own-conduct)

[Corporations Act](#corporations-act)[Tax & DPNs](#tax-dpns)[Employment](#employment)[Consumer & competition](#consumer-competition)[Safety & environment](#safety-environment)[AML](#aml)[Privacy](#privacy)[Guarantees](#guarantees)[Own conduct](#own-conduct)[Indemnity](#indemnity)

Exposure the law imposes 

## 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.

### Corporations Act 2001 (Cth) 8 regimes 

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.

### Tax (Taxation Administration Act 1953 (Cth)) 2 regimes 

### Employment and workplace 4 regimes 

### Consumer, competition and financial services 3 regimes 

### Safety, environment and sector 3 regimes 

### Anti-money laundering 1 regime 

### Privacy 1 regime 

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](/resources/director-liability-ato-compliance), including [director penalty notices](/article/director-penalty-notices-australia) and [responding to a DPN in the first 21 days](/article/responding-to-dpn-21-days).

[Not sure which of these regimes touch your business? Talk to us. ](/contact)

Exposure you signed up for 

## 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. ](/contact)

Exposure for your own conduct 

## 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.

](/article/insolvent-trading-directors-guide-section-588g)[

### 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.

](/article/australian-directors-duties)[

### 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.

](/article/creditor-rights-against-directors-australia)[

### 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.

](/article/corporations-act-civil-penalties)

## Frequently Asked Questions

### Can a director be personally liable for company debts in Australia?

### Am I personally liable for my company's lease if it goes under?

### Can I be personally liable for my company underpaying staff?

### I run my business through a trust. Am I protected?

### Does my D&O insurance cover all of this?

### What is a director penalty notice?

### What is the difference between a lockdown and non-lockdown DPN?

## 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](/commercial-lawyers-brisbane) or get in touch directly.

[Contact Us](/contact)

This 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.

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