The Lifetime Director ID Number (DIN)
DEADLINE: 30 November 2022
Under a rewrite of Australia’s business registers, Directors will be required to register for a unique
identification number that they will keep for life, much like a tax file number.
The introduction of the Director Identification Number (DIN) regime is part of the Government’s Modernisation of Business Registers
(MBR) Program creating greater transparency and tracking the movements of individuals over time. The MBR will unify the Australian Business
Register and 31 ASIC business registers, including the register of companies. In effect, the system will create one source of truth across
Government agencies for individuals and entities and will be managed by the Australian Taxation Office (ATO).
Current Australian directors or corporate trustees in an SMSF will now have one year to apply for their unique director identification
number before fines of over $1.1 million kick in for non-compliance.
while directors of Indigenous corporations that are governed by the Existing company directors will now be required to apply for a director identification number (Director ID / DIN) by
1 November 2022, Corporations (Aboriginal and Torres Strait Islander) Act 2006
( CATSI Act) will be required to apply for the unique identifier by 1 November 2023.
For those who are a director or a corporate trustee of a self-managed super fund (SMSF), they will also need to apply for a director
ID by 1 November 2022.
Why a Director ID?
The target is illegal phoenixing. Phoenixing is when directors transfer the assets of an existing company to a new company without paying
full value, leaving the debts with the old company. Once the assets have been transferred, the old company is liquidated leaving creditors
out of pocket. Phoenixing has a ripple effect in the community and is estimated to cost between $2.9 billion and $5.1 billion annually. The
real face of the impact is to the unpaid creditors – mostly customers and contractors, unpaid employee entitlements, and the broader cost
through unpaid taxes.
Once the assets are transferred to a new company, the directors then continue to operate the business in a new entity. They just set aside
the problems and start again with the benefit of the good parts of their old company as a foundation.
Under the new regime, all directors will need to have their identity confirmed when they consent to being a director, so no more Justin
Bieber (unless your name really is Justin Bieber!).
You will then keep this number permanently, even if you cease to be a director – the number will not be issued to another person. The
result is an ID system that traces a director’s relationships across companies, enabling better tracking of directors of failed companies
and prevents the use of fictitious identities.
Who will need a Director ID?
The DIN is very broad and introduces the concept of an ‘eligible officer’. An eligible officer is a director who:
is appointed to the position of director, or is appointed to the position of an alternate director and is acting in that capacity
(regardless of the name that is given to that position); or
any other officer of the registered body who is an officer of a kind prescribed by the regulations.
The definition picks up the concept of ‘shadow directors’ who act in the capacity of directors through influence and control but are not
directors by title. That is, its feasible that someone who is not a director but is seen to be making decisions on behalf of the company can
be held to account.
An eligible officer is a director of a:
registered foreign company
registered Australian body under the Corporations Act such as an association or a charity, or
an Aboriginal and Torres Strait Islander corporation (which are registered under the CATSI Act).
How and when do I need to register a DIN?
Directors will need to apply for an ID through the Australian Business Register system through their myGov account. If you do not have a
you must set one up. Your myGov account creates your digital credentials to verify who you are.
When you register, you will need to declare that the information you have provided is true and correct, you are or will be an eligible
officer within 12 months, and you do not have an existing ID (or applied for one).
Existing directors will have until 1 November 2022 to acquire a DIN (1 November 2023 for directors of corporations under CATSI).
For the first year of the program, new directors will have 28 days to apply for a DIN from the time of their appointment. From the first
year onward, you will need to have a DIN prior to being appointed as a director.
Unlike the existing system that merely registers information, the new regime will verify a director’s information and may utilise other
sources of information such as your driver’s license and/or link to your client record held by the ATO.
The problem of 'Director-in-Name' only
The new regime will not overcome one problem area – where naive participants are encouraged to become directors in name only such as elderly
parents, or a spouse. That is, the identity of that person is legitimate but their role as a director is merely window dressing and they do
not fulfil the role as active participants - a situation that is not uncommon in family groups.
It’s important that anyone agreeing to be a director understands the implications. Being a director is not just a title; it is a
responsibility. At a financial level, directors are responsible for ensuring that the company does not trade while insolvent. The by-product
of this is that the directors may be held personally liable for the debt incurred. The director penalty regime has also been tightened up in
recent years to ensure that directors are personally liable for PAYG withholding, net GST and superannuation guarantee charge liability if
the company fails to meet its obligations by the due date. For many small businesses, the directors are also often personally responsible
for company loans secured against property such as the family home.
Failing to perform your duties as a director is a criminal offence with fines of up to $200,000 and five years in prison.
Ignorance is not a legal defence. Don’t sign anything unless you understand the consequences.
Get in touch if you need assistance with setting up your Director's ID.