Director penalties Australia 2026: Personal liability for payroll non-compliance
Directors Face Personal Liability
You’re a director. You’re personally liable for payroll non-compliance.
Not just the company. YOU.
Wage underpayment, missing super, late BAS lodgment if your company breaks payroll law, you can be personally fined. And in serious cases, prosecuted criminally.
This applies even if you hired someone to handle payroll.
The Penalties (They’re Serious)
For directors involved in wage theft:
- Up to $93,900 penalty per contravention
- Up to 10 years’ imprisonment (in criminal cases)
- No cap on total liability
For super non-payment:
- Up to $93,900 penalty per employee
- Director personally liable if company doesn’t pay
- Automatic if company enters administration
For late BAS lodgment:
- Up to $33,600 penalty
- 1 penalty unit ($330) per 28 days late
- Compounds monthly
For STP reporting failures:
- Up to $55,250 penalty
- Personal liability if director ignored warnings
What Triggers Director Penalties?
Scenario 1: Wage theft by mistake
You hired a payroll person. They calculated super wrong (OTE instead of QE). Employees were underpaid for 18 months.
Your liability: You’re the director. You’re responsible for oversight. Even if you didn’t know, the penalty applies.
Cost: $93,900+ per employee affected.
How to avoid: Audit payroll quarterly. Don’t assume someone else got it right.
Scenario 2: Ignoring warning signs**
Fair Work Ombudsman sends a compliance notice. Your payroll has errors. You ignore it. They issue a second notice. You still ignore it.
Your liability: Willful non-compliance. Personal penalties apply.
Cost: $93,900+ per contravention.
How to avoid: Respond to Fair Work notices immediately. Fix errors within the timeframe given.
Scenario 3: BAS not lodged**
Your accountant was supposed to lodge your BAS. They didn’t. Three quarters went unpaid.
Your liability: As director, YOU’RE responsible for BAS lodgment, not your accountant.
Cost: $33,600 + 1 unit per 28 days late = compounding penalties.
How to avoid: Set a calendar reminder. Lodge 14 days before deadline. Don’t rely on others.
Scenario 4: Super not paid (company insolvency)
Your company fails. Employees are owed super. You didn’t pay it.
Your liability: If the company can’t pay, directors are personally liable for super debt (in some circumstances).
Cost: Full super amount owed + interest.
How to avoid: Set aside super in a separate account. Don’t use super money for business expenses.
The Safe Harbour: Due Diligence Defense
You CAN reduce personal liability if you show “due diligence.”
Due diligence means:
- Implementing systems to prevent non-compliance
- Regular audits of payroll
- Training staff on compliance
- Responding to compliance notices
- Self-disclosing errors
Example: You discover a super underpayment. You immediately self-disclose to Fair Work. You calculate backpay. You pay employees.
This shows due diligence. Penalties may be reduced (but not eliminated).
What Directors Must Do
1. Understand your obligations
Read Fair Work’s director fact sheet. Know what you’re responsible for.
2. Implement systems
- STP-compliant payroll software
- Quarterly audit process
- Award compliance checklist
- Super payment tracking
3. Train your team
Make sure whoever handles payroll knows:
- Current award rates
- Qualifying earnings (not just salary)
- Super payment deadlines
- BAS lodgment dates
4. Audit regularly
Monthly: Spot-check 2-3 pay slips. Is award rates correct? Is super calculated right?
Quarterly: Full audit of payroll. Compare to STP reports. Check BAS calculations.
5. Respond to notices immediately
Fair Work sends a notice? Respond within 14 days. Fix the issue. Document everything.
6. Self-disclose errors
Found an underpayment? Tell Fair Work before they tell you. Self-disclosure reduces penalties.
Get Professional Help
Payroll compliance is complex. One mistake = personal liability.
In Campbelltown and Greater Sydney, we help directors implement compliance systems.
📞 Call: 04 044 71 816
We’ll audit your current payroll setup, identify risks, and help you implement systems to avoid director penalties.
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