Din Din Din! Your days as a director are
about to be ‘numbered.’
The Federal Government is working on implementing a Director ID number system, which will allow for the tracing of directors across companies.
This system is to be implemented from November 30, 2022, and Directors will be required to apply for a new Directors ID Number (or DIN) by that date.
This system will be managed separately to the Tax File Number (TFN) and Australian Business Number (ABN) system now in operation and will be managed by the Commonwealth Registrar, operating as a separate statutory function of the ATO as part of the Governments “Modernising Business Registers (MBR) program.
In the 2020 federal budget, additional funding was announced to integrate the system with the government’s Modernising Business Registers (MBR) program.This integration will create a super registry by bringing together the Australian Business Register and 31 other registers currently administered by the Australian Securities and Investments Commission, forming the Commonwealth Registrar.
It is hoped this system will prevent the use of false identities and help prevent illegal phoenix activity, where directors deliberately liquidate companies to avoid paying debts, which is estimated to cost the Australian economy between $1.8 billion and $3.2 billion each year. i.e. It ‘should’ make it easier to trace directors who move operations from one company to another, or who have a record of ‘companies closing’ year on year.
How the Director ID system will work
All directors will be required to establish their identity with the Commonwealth Registrar before receiving their unique director ID, which they will retain throughout their lifetime, even if they cease to be a company director.
This process will involve directors providing their names and former names, addresses and former addresses, contact details, and their date and place of birth.
Directors will also need to prove their identity using key identifying documents, such as a driver’s licence, passport, birth certificate or visa, and may be asked to provide their tax file number (TFN). I expect that this last part will become a critical aspect so that it is harder for people to obtain multiple DIN’s. It is currently relatively simple for a person to have two different sets of details listed with ASIC, depending on whether or not middle names are included in the filings, address details, etc., are maintained correctly.
While the Commonwealth Registrar will operate separately from the ATO, it may ask the ATO to provide the TFN of applicants to verify their identities, and details provided to the registry may be cross-checked against the taxation office’s records.
Directors will face significant civil and criminal penalties if they fail to apply for a director ID by the deadline and for conduct that contravenes the new rules, including falsifying identify information or intentionally apply for multiple director IDs
For companies registered under the Corporations Act, directors face potential civil penalties of up to 5,000 penalty units, or $1.1 million.
What Happens next?
According to the proposed arrangements, the director ID regime will go through a testing phase, which will run until October 31 this year. As part of this phase, the Commonwealth Registrar will invite a group of existing directors to test the system to make sure it has a robust, reliable and consistent user experience.
After this testing is completed, existing directors and those who became directors during the testing phase will have a little over 12 months to apply for their director ID number.
