Company Director Identification Number (DIN)
Do you operate under a company structure? From 1st November 2021, you will need to apply for a Director ID to continue to act as a Director. This process will verify your identity and penalties will apply to those who do not obtain their Director ID in time. Read on for more on why and how to apply.
DEADLINES
Existing directors have until 30 November 2022 to apply.
Directors appointed between 1 November 2022 and 4 April 2022 must apply within 28days of appointment.
From 5 April 2022, intending directors must apply before being appointed.
Currently the identifying info that is required to be a director of a company is your name, DOB, Tax File Number (TFN) and place of birth but no verification process was ensued. Existing directors will now be required to obtain a unique identification number they will keep for life, even if they cease to be a director. Similar to a TFN, once issued it becomes your number. The new Director Identification Number (DIN) will be assigned to natural persons only and will be cross-referenced with your other identity information to confirm who you are.
There will be civil and criminal penalties for directors who fail to apply for a DIN or apply for one with false identity info or who intentionally apply for multiple DINs. Failing to perform as a director is a criminal offence with fines of up to $200,000 and five years in prison.
Illegal Phoenixing
This measure has been in the works for some time to stamp out illegal phoenixing where directors falsify their identity to act as directors for companies that trade insolvent. They have been quite creative, swapping first and middle names, making “mistakes” on DOBs and place of births.
This measure means enough is enough and its time to operate honestly and ethically.
Being a director is a responsibility, not just a title. A director is responsible for the health of the company, its employees, customers, suppliers, contractors and government agencies. A company should only trade when solvent, i.e. has sufficient assets and cashflow to support its outgoings and financial obligations. Directors can be held personally liable (under the Director Penalty Regime) for PAYG Withholding and Super for staff plus GST payables, hence why proper identification will force this to be respected otherwise a director’s personal assets could be seized to pay these company debts.
“WHAT DOES ILLEGAL PHOENIXING MEAN?
Phoenixing is when directors strip assets from an existing company and intentionally trade insolvent only to leave debts with the old company and re-start the business, usually under a different name.
Dumping and running, only to pop up again and repeat the fraudulent process.
This creates a financial gain and advantageous market-competitive position for the “new” business leaving thousands, or millions, of dollars unpaid.”
Statistics have shown that more often than not the ATO is a major creditor in the payables list of abandoned or liquidated companies. Unpaid taxes affect the entire community, not to mention employees and other innocent businesses that fall victim to this. Legitimate liquidation is an unfortunate part of business but intentional conduct to this degree is not.
Even in legitimate circumstances, there are reasonable limits to how many times a director can liquidate a company before ASIC will question their ability to act as a director. This new DIN will also assist in tracking this.
Government’s One Source of Truth
This is part of the government’s Modernisation of Business Registers (MBR) Program to create one source of truth across the Government agencies that manage individuals and entities, e.g. ATO, Australian Business Register and ASIC. This will be managed by the ATO and will be paramount to unifying the information.
“At the moment a company can be deregistered with ASIC while it still has tax outstanding with the ATO. This should not be possible. These agencies currently do not talk to each other and the MBR will open the pathway so mistakes can no longer be made.”
How To Apply
When the system is ready come Nov 2022, directors will need to apply for their DIN through the Australian Business Registry Services (ABRS) using their myGov account. Follow this link to see how to apply.
Existing directors have until 30 November 2022 to acquire their DIN. New directors are best to acquire their DIN before being appointed as a director of a new or existing company but must do so within 28days of appointment. The identification information provided will be verified against your driver’s license or client record held by the ATO.
Reach out if you need help with any of this. Many of our clients will be affected by this and we’re on board to make this a smooth transition.