ATTENTION ALL COMPANY DIRECTORS
- New Company Director Identification Number
The Government has introduced a Director Identification Number (DIN) to provide greater transparency around the background of company directors to combat illegal phoenix activity that leaves creditors unable to recover debts. The introduction is very timely given the number of financially distressed companies on the verge of insolvency due to the COVID-19 pandemic.
The Director Identification Number is designed to deter Directors from engaging in illegal phoenix activity and will help regulators detect phoenix activity. Directors need to be aware of their obligations and the penalties for such activity include large fines and up to 15 years’ imprisonment.
So What Impact Will the DINs Have on Company Directors, Aside From More Form Filling?
For most directors, the impact of the new Director Identification Number will be minimal. For those who comply with Australia’s corporate laws and regulations, the DIN is simply a unique identification number issued by the government that they retain for life. There’s no fee and the government administers the system through the new Australian Business Registry Services (ABRS), which is consolidating ASIC’s 31 business registers and the Australian Business Register.
All directors will be required to provide a number of documents to the Commonwealth Registrar to establish their identity and receive their unique DIN. This includes a driver’s licence (or learner’s permit), passport, birth certificate, Australian visa and Medicare card. The Registrar may also request the director’s tax file number (TFN) and the Registrar can ask the ATO to provide the TFN of an individual who has applied for a director ID to verify the identity of the individual.
As the DIN system will be administered by the Commonwealth Registrar operating under a separate statutory function of the ATO, bad director behaviour should come to the attention of the ATO more often and more quickly. Any insolvency practitioner who enables directors in their phoenixing activity will also come to the ATO’s attention faster.
The DINs Will Benefit Almost Everyone Involved in a Company
In addition to helping deter and identify illegal phoenix activity, and with it reduce the number of creditors left unpaid, the DINs will also benefit investors, shareholders and company directors by giving them access to better background knowledge of a director, particularly their relationships with companies past and present, and help prevent them appointing fictitious directors, i.e., those with false identities.
Directors must apply for their DIN by November 30, 2022 and penalties will apply for falsifying identity information or applying for multiple DINs. New company directors registered under the Corporations Act must apply for a DIN within 28 days of becoming a director. With the legislative changes, now more than ever, directors need to be aware of their obligations.
Directors don’t need to do anything now. This process forms part of the ATO's Modernising Business Registers programme and are still testing the new application process. When it's time to apply, directors will be able to use ABRS online services and will sign in using their myGovID app.
As always, don't hesitate to contact us for help regarding any queries this article may raise.
This article forms part of our Business Accelerator Magazine. Download the latest edition HERE or browse other articles from this edition below:
- 2021-22 Federal Budget Summary
- It's Time to Work ON Your Business not IN your business
- 2021 Tax Return - Home Office Expense Claims
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