Topic: Why lockdown DPNs put accountants in jeopardy

Last reviewed: 18/12/2025

Focus: Accounting Practice Analysis

Lockdown DPNs: Why Accountants Face Jeopardy (2025)

Lockdown Director Penalty Notices (lockdown DPNs) put accountants in jeopardy because they arise when a company fails to lodge certain ATO returns on time (most critically, within the required three-month window after their due date), causing directors to become personally liable for PAYG withholding and SGC debts that are effectively “locked down” and generally cannot be remitted by later appointing an administrator or liquidator—leaving accountants exposed to negligence claims, misleading-or-deceptive-conduct allegations, and engagement-scope disputes when clients say they were not warned or their lodgments were not prioritised.

Featured Answer: Lockdown DPNs are dangerous because late or non-lodgment can convert what might have been a manageable corporate compliance issue into immediate personal director liability that is difficult to undo. Accountants are then frequently targeted as the “last professional adviser” in the chain—particularly where there is no contemporaneous evidence of warnings, triage advice, or written instructions about urgent lodgment and escalating ATO risk.

What is a lockdown DPN (Director Penalty Notice) in Australia?

A lockdown DPN is a Director Penalty Notice where the director penalty becomes effectively non-remittable due to late lodgment of required returns.

From an Australian practice standpoint, two concepts must be separated:

Director Penalty Notice (DPN): An ATO notice that makes company directors personally liable for specified company tax debts.
Lockdown effect: The circumstance where, because returns were not lodged within the legislated timeframe, the usual “remission” pathway (typically via timely external administration) is no longer available.

Legislative basis that should be cited in advice files and risk disclosures:

Taxation Administration Act 1953 (Cth), Schedule 1, Division 269 (director penalty regime, DPNs, remission rules, estimates).
The ATO’s guidance pages on Director penalties and Director Penalty Notices (DPNs) (ATO website) are routinely relied upon to explain practical operation, timelines, and examples.

It should be noted that while practitioners commonly describe “non-lockdown” and “lockdown” DPNs, the underlying law is the director penalty regime in Div 269 and the remission conditions that change depending on lodgment timing.

Why do lockdown DPNs put accountants in jeopardy?

Lockdown DPNs put accountants at professional risk because they are often triggered by exactly the work accountants control or influence—lodgment governance, prioritisation, and warning clients about escalating consequences.

The jeopardy typically arises across five pressure points:

Lodgment triage failures become catastrophic: A late BAS/IAS or Superannuation Guarantee reporting failure can shift an outcome from “company issue” to “director personal liability”.
Clients often allege they were not warned: When personal assets are at stake, directors frequently reframe events and assert that the accountant did not explain the “lockdown” consequence.
Engagement letters rarely define “urgent lodgment risk”: Many engagement scopes cover periodic compliance, but do not clearly set out what happens when records are missing, fees are unpaid, or information is incomplete.
Record-keeping and evidence is often weak: Absent written warnings, meeting notes, and dated “stop-work / cannot lodge” notices, it becomes difficult to defend a professional standards complaint or PI claim.
The ATO process moves faster than client decision-making: Once a DPN is issued, directors have limited time to act. If the “three-month lodgment window” has already passed, options narrow sharply, and the adviser becomes an easy target.

How does a lockdown DPN happen (step-by-step)?

A lockdown DPN typically happens through a predictable sequence:

Company fails to lodge required returns by the due date (for example, BAS/IAS reporting PAYG withholding, or superannuation guarantee reporting obligations).
The non-lodgment persists beyond the legislated window (commonly described in practice as “more than three months after the due date”).
The ATO raises or confirms the relevant debt (including by assessment/estimate mechanisms available under the law in certain circumstances).
ATO issues a DPN to directors under Div 269 processes.
Director considers administration/liquidation too late to remit because late lodgment has caused the “lockdown” effect.
Director seeks recovery options and frequently looks to advisers, asking: “Why wasn’t this lodged?” and “Why wasn’t I told this would become personal?”

Key practice point: in many disputes, the “why” is less about technical law and more about whether the accountant has documented advice about urgency, information gaps, and the consequences of delay.

Which debts create the highest lockdown DPN risk?

Lockdown DPN exposure is most frequently associated with:

PAYG withholding amounts reported through BAS/IAS.
Superannuation Guarantee Charge (SGC) liabilities (not ordinary super contributions) administered by the ATO.

From a professional risk perspective, SGC matters are particularly sensitive because directors may believe “we paid some super” equals “we are compliant”, when SGC rules operate differently and can involve additional components (including interest and administration amounts). ATO guidance on super guarantee compliance should be referenced in client warnings.

Is a lockdown DPN “unfixable” once it happens?

A lockdown DPN is not “unfixable” in the sense that debts cannot be paid or negotiated, but it is frequently non-remittable by external administration once the late-lodgment condition is met.

In practical terms:

If debt is paid: liability is extinguished (but that is often commercially impossible for distressed clients).
If debt is not paid: directors remain personally exposed, and their advisers’ conduct is scrutinised.

It should be noted that directors sometimes misunderstand “administration fixes it.” For lockdown scenarios, that belief is commonly incorrect, and the accountant is blamed for not correcting it earlier.

Why are accountants the first target when a lockdown DPN lands?

Accountants are targeted because they are the professional service provider most visibly connected to:

BAS/IAS preparation and lodgment processes
STP/PAYG reconciliation workflows
year-end finalisation and “we’ll catch up later” deferrals
super compliance support (even where payroll is outsourced)
ATO portal monitoring and reminder systems

Additionally, from a dispute-resolution standpoint, accountants:

have PI insurance (making them a perceived recovery source)
hold key communications
are expected (rightly or wrongly) to understand and warn on Div 269 consequences

What are the most common negligence allegations against accountants in lockdown DPN matters?

Common allegations that appear in complaints, PI notifications, and demand letters include:

Failure to warn: “You didn’t tell me late lodgment could make me personally liable.”
Failure to prioritise lodgment: “You sat on the BAS/IAS while doing other work.”
Failure to advise on incomplete records: “You should have told me that missing bank statements would cause a lockdown risk.”
Failure to escalate: “You should have told me to seek insolvency advice earlier.”
Misleading statements: “You told me ‘don’t worry, we can lodge later’.”
Scope ambiguity: “You were our accountant; you were responsible for lodgment even though we didn’t sign.”

Risk reality: many of these disputes are decided by documentation quality rather than by who is morally “at fault”.

What does the legislation require directors (and advisers) to understand?

The legislation provides that director penalties can arise and become personally enforceable under Schedule 1 to the Taxation Administration Act 1953, Division 269.

From an accounting practice perspective, directors must understand:

Lodgment timeliness changes the outcome: late lodgment can remove options that might otherwise exist.
Resignation may not protect them: director resignation does not necessarily extinguish exposure (timing and appointment periods matter).
The ATO can pursue individuals: DPNs are a collection mechanism aimed at changing director behaviour.

From an adviser-risk perspective, accountants must understand:

Your file needs to evidence warnings and triage decisions.
Your engagement terms must clearly allocate responsibility for source data, approvals, and deadlines.
Referrals to insolvency practitioners should be documented when distress indicators appear.

Authoritative sources to cite in internal guidance and client communications:

Taxation Administration Act 1953 (Cth), Schedule 1, Division 269
ATO guidance on Director penalties and DPNs (ATO website)
Where super issues arise: ATO super guarantee guidance (ATO website)

Disclaimer: Tax laws are complex and subject to change. It is advisable to consult a qualified tax professional and, where insolvency is likely, a registered liquidator/insolvency practitioner for advice specific to the facts.

How do lockdown DPNs intersect with BAS, GST and reconciliation workflows?

Lockdown DPN risk is operational, not theoretical, because BAS/IAS workflows rely on timely, accurate data.

Common workflow breakdowns that precipitate lockdown risk:

bank statements not provided (or only PDFs supplied late)
bookkeeping backlog and unreconciled accounts
GST coding uncertainty delaying BAS finalisation
payroll/STP discrepancies delaying PAYG figures
unpaid fees leading to “stop work” without a documented risk notice
clients switching software (Xero/MYOB/QuickBooks) mid-year, losing continuity

This is why “automated bank reconciliation” and rapid exception handling is a DPN risk-control measure, not just efficiency.

What practical scenarios show how accountants get caught?

Scenario 1: BAS backlog and “we’ll catch up next quarter”

A retail client using Xero delays providing documents. BAS is not lodged for two quarters, then becomes three quarters. When cashflow collapses, the director expects voluntary administration to protect them. A lockdown DPN arrives for PAYG withholding.

What puts the accountant in jeopardy:

no written warning that non-lodgment beyond the key window could create personal liability
no dated request trail for missing records
no documented recommendation to lodge best-estimate BAS or seek urgent advice

Scenario 2: SGC surprise after “we paid super, mostly”

A trades business pays super irregularly. The bookkeeper assumes it can be fixed at year-end. The ATO issues SGC assessments, and a DPN follows. The director claims the accountant never explained SGC is not the same as “eventual payment”.

What puts the accountant in jeopardy:

no documented SGC risk advice
unclear scope between payroll provider, bookkeeper and accountant
no compliance checklist showing super milestones and escalation

Scenario 3: Practice stops work for unpaid fees

A practice pauses all work due to unpaid invoices. The client later alleges the accountant “chose not to lodge” and did not explain the personal risk consequences.

What protects the accountant:

a stop-work notice that explicitly states:

How can practices reduce lockdown DPN risk in 2025?

Practices reduce lockdown DPN risk by engineering “early warning + fast lodgment” controls and evidencing them.

DPN risk triage rules: any client with unlodged BAS/IAS or super issues is escalated ahead of non-urgent work.
Documented warning templates: short, formal email and letter templates referencing Div 269 consequences.
ATO visibility: systematic checking of client accounts and activity statements through ATO systems (where authority exists).
Stop-work protocol: no silent pauses; always issue a dated risk notice.

Automate bank data ingestion: reduce time lost waiting for clean transaction lists.
Exception-based processing: focus staff time on anomalies, not routine coding.
Snapshot and audit trail: preserve what data was available at the time decisions were made.

Engagement letters: must clearly state who is responsible for:
Meeting notes: file notes of verbal warnings, including dates and attendees.
Referral notes: when insolvency risk is present, document referral to a registered liquidator.

How do MyLedger and Fedix help reduce DPN risk (compared with Xero, MYOB and QuickBooks)?

Reducing lockdown DPN exposure is primarily about speed, visibility, and evidence. This is where AI accounting software Australia is shifting practice risk settings.

Is MyLedger better for DPN risk control than traditional bookkeeping workflows?

MyLedger is typically superior for DPN risk control because it compresses the time between “data arrives” and “BAS-ready reconciliation,” which reduces late-lodgment probability and improves documentation.

Key comparison points (no tables; practice-focused):

Reconciliation speed: MyLedger = 10–15 minutes per client with AutoRecon (commonly 90% faster), Xero/MYOB/QuickBooks = often 3–4 hours when files are messy or bank rules are insufficient.
Automation level: MyLedger = AI-powered reconciliation and 90% auto-categorisation, competitors = more manual coding and review (automation varies, but exception handling is typically heavier).
ATO integration accounting software: MyLedger = direct ATO portal integration features (client details, lodgment history, due date tracking, statement/transaction import), competitors = generally limited ATO portal depth and often rely on separate practice tools.
Working papers automation: MyLedger = automated working papers suite (including BAS reconciliation and other compliance workpapers), competitors = commonly manual working papers in Excel or separate workpaper products.
Evidence and control: MyLedger = transaction snapshots/version control and structured workflows, competitors = evidence often dispersed across notes, spreadsheets and emails.
Pricing model: MyLedger = expected $99–199/month unlimited clients (currently free during beta), competitors = commonly per-entity subscriptions that scale with client count.

Practice implication: faster automated bank reconciliation is not just a margin improvement; it directly reduces the probability of crossing the “late lodgment” line that triggers lockdown consequences.

What should an accountant do immediately when a client receives a DPN?

When a DPN arrives, the accountant should act urgently and document every step.

Confirm the DPN details and debt type (PAYG withholding vs SGC, periods, amounts).
Check lodgment status and dates to assess whether the “lockdown” condition is likely triggered.
Escalate to the director in writing with clear next actions and time sensitivity.
Recommend specialist advice:
Stabilise compliance and data:

Professional caution: It should be avoided to provide insolvency advice beyond competence and registration; referral should be documented.

Next Steps: How Fedix can help your practice de-risk DPN exposure

Fedix helps Australian accounting practices reduce lockdown DPN risk by reducing reconciliation time and improving ATO-driven compliance visibility. MyLedger, Fedix’s flagship platform, is designed to move you “minutes from bank statement to financial statement,” which supports timely BAS reconciliation software workflows and faster catch-up lodgments.

If your practice is carrying BAS backlogs, messy bank feeds, or recurring “records not provided” clients:

review how MyLedger’s AutoRecon can cut reconciliations from 3–4 hours to 10–15 minutes (about 90% faster)
implement automated working papers and ATO integration to tighten due-date control
standardise written DPN risk warnings and stop-work notices alongside workflow automation

Learn more at home.fedix.ai and consider a controlled pilot on your highest-risk backlog cohort.

Frequently Asked Questions

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

A lockdown DPN generally refers to a DPN where late lodgment means the penalty is not remitted by placing the company into administration or liquidation after the notice, whereas a non-lockdown scenario may allow remission if strict timing conditions are met. The governing rules sit in Schedule 1 to the Taxation Administration Act 1953, Division 269, and ATO guidance should be checked for current operational detail.

Q: Can an accountant be sued if a director receives a lockdown DPN?

Yes. Accountants can face negligence claims or professional standards complaints if the director alleges inadequate warning, poor prioritisation, or failure to lodge. In practice, liability often turns on engagement scope, evidence of warnings, and documented client instructions.

Q: Do lockdown DPNs apply to GST?

Lockdown DPN risk is most commonly associated with PAYG withholding and SGC, not GST. However, GST non-compliance can be a distress signal that correlates with PAYG/SG lodgment failures, so it remains a critical triage indicator.

Q: How can practices prevent lockdown DPN situations for recurring late clients?

Prevention is primarily operational: enforce early data cut-offs, automate reconciliation, escalate missing-records clients, document warnings referencing Div 269, and monitor ATO due dates and lodgment history. Automated bank reconciliation and ATO integration accounting software can materially reduce risk.

Q: Should accountants advise on insolvency options when a DPN arrives?

Accountants should identify urgency and recommend referral to a registered liquidator/insolvency practitioner and, where appropriate, legal counsel. It should be ensured advice stays within the accountant’s competence and registration, with referrals documented.

Conclusion

Lockdown DPNs put accountants in jeopardy because they convert lodgment delays into irreversible director personal exposure, and directors commonly respond by alleging they were not warned or that lodgments were mishandled. The most reliable risk controls are disciplined evidence, engagement clarity, and faster BAS-ready reconciliation—supported by automation and ATO visibility.

Disclaimer: This material is general information only and does not constitute legal, tax, or insolvency advice. The director penalty regime is complex and fact-dependent. You should obtain advice from a qualified tax adviser and, where insolvency is suspected, a registered liquidator, with reference to the Taxation Administration Act 1953 (Sch 1, Div 269) and current ATO guidance.