Do You Need a Director Identification Number?
Directors of companies will soon have to enrol in the Director Identification Number regime. This requires current and future directors to apply for director identification numbers (DIN) which will be permanently linked to the individual, even if they are no longer a director. It is hoped the regime will make it easier to trace relationships across companies and reduce instances of phoenixing and other illegal activity. Most existing directors will have until 30 November 2022 to apply for the DIN through the ATO.
The Director Identification Number regime came into force late in 2020 as a tool for the Federal Government to reduce phoenixing and black economy activities. Broadly, the regime will require all directors to confirm their identity with the ATO, at which time they will be issued a unique identifier. This identifier will then be permanently linked to the individual, even if they cease to be a director.
The Government has recently introduced an instrument that extends the time available for persons who are eligible officers immediately before the commencement of the obligations to apply for a DIN. Individuals that operate under the Corporations Act 2001 and became a director on or before 31 October 2021 are required to apply for a DIN before the end of the transitional period, which is between 4 April 2021 and 30 November 2022.
Directors who operate under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 and became a director on or before 31 October 2021 will have even more time to apply for a DIN – until 30 November 2023 (with a transition period between 4 April 2021 and 30 November 2023). Any individuals who are appointed directors between 1 November 2021 and 4 April 2022 will have within 28 days of their appointment to apply for the DIN, and from 5 April 2022 individuals seeking to become directors will need to apply for a DIN before their appointment.
It is envisaged that the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and preventing the use of fictitious entities. It will also assist regulators to investigate a director’s involvement in what may be repeated unlawful activity, including illegal phoenixing.
The Australian Securities and Investments Commission (ASIC) and external administrators will also benefit, saving time and money, as the DIN will make it simpler to track the corporate history of various directors and assist liquidators in improving the efficiency of the insolvency process. The DIN is also expected to protect individuals against the fraudulent use of stolen identities to set up companies, and is expected to improve overall data integrity and security.
To prevent abuse of the regime, any conduct that undermines the DIN requirement will be subject to civil and criminal penalties. This includes deliberately providing false identity information, intentionally providing a false DIN or intentionally applying for multiple DINs.
Directors will be able to use the new Australian Business Registry Services (ABRS) online services to register from 1 November 2021.
Sign-ins and director identity verification will be conducted using the myGovID app. This app requires a compatible smart device and will require an individual to enter personal details and verify at least two Australian identity documents (drivers licence, birth certificate, citizenship certificate, passport, etc) to obtain the “standard identity strength”. The “strong identity strength” which is currently in testing phase will require the completion of an additional face verification check.
Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.