Hey guys, it’s your friendly neighbourhood taxman back with another video aimed at helping
you navigate the complex world of running a business.
In today’s video, we’re explaining what you need to know about the new director identification
rules that the Australian government recently introduced into law to promote good corporate
conduct, tackle illegal phoenix activity and prevent fraudulent director identities.
If you don't know what illegal phoenixing is. It's basically when a director liquidates
and closes down a company with debt and rebirths it or a similar company with a fresh start.
Resulting to clearing all the debts and responsibilities. Some directors have been changing their names
to make it harder for them to be identified as well.
The government has had some trouble so they have brought in a new way of managing this.
This is in the form of a Director identification number system.
A director identification number (DIN) is a unique 15-digit number that will be given
to all directors or persons who intend to become directors. This is kind of similar
to the Australian Business Number System, but one for directors.
Once the Australian Business Registry Services has verified a directors identity, they’ll
be issued the ID number, and it’ll be used to trace the director’s relationship to
companies.
Applications for your Director ID open from the 1st November 2021, so here’s everything
you need to know about who needs to have a director ID, how to apply for one, the penalties
you may face for not applying and how the government intends to use it to combat illegal
phoenix activities.
Unfortunately, up until now, directors have been able to falsify their company records
by using different names, making it difficult to establish whether directors have been involved
in phoenix activity.
By implementing the DIN scheme, the government hopes to get a hold of these phoenixing activities
and prevent it from happening in the future because they can be detrimental to creditors
and employees and to the economy overall.
The director ID will be attached to a director permanently, even if they stop being a director,
change their name, or move interstate or overseas, they will still have the same number.
Okay, so now you have a basic understanding of what the director ID initiative is and
why it was introduced, let’s take a look at who should apply for one.
If you’re a director or alternate director acting in that capacity for one of the following
entities, you’ll need to apply for a director ID number: a company, a registered Australian
body or a registered foreign company under the Corporations Act, and an Aboriginal and
Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres
Strait Islander) Act.
You won’t need to apply if you’re a sole trader, a partner in a partnership, a company
secretary, or an external company administrator and if you’re a person that is sometimes
referred to as a director but not officially appointed. So basically the people on Linkedin!
You are also excluded from having to register for a Director ID if you’re a director of
a registered charity or if you’re an officer of a certain unincorporated association, cooperative
or incorporated association. established under state or territory legislation unless the
organisation is also a registered Australian body.
If you fall into the category of directors that need a director ID, the application process
is relatively straightforward and can be completed on the Australian Business Registry Services
website.
You’ll need a myGovID to start the application process, you should have that already, and
you’ll need to provide your residential address as held by the ATO, tax file number
and information from two documents to verify your identity.
These two documents can either be your bank account details, PAYG payment summary, a dividend
statement, super account details, or an ATO Notice of assessment or a Centrelink payment
summary
Once the application process is complete and you have received your identification number,
you must give the details to the people responsible for maintaining the records for the company.
That could be the director or the secretary!
Directors under the Corporations Act and the CATSI Act can start applying for their identification
numbers from November 2021. But there are a few deadlines you need to be aware of.
Existing directors under the Corporations Act will have a year to apply for their director
ID, and new directors appointed between 1 November 2021 and 4 April 2022 will have 28
days after their appointment to apply for their director ID.
New directors appointed from 5 April 2022 will be required to apply for their director
ID before they are appointed as directors.
Under the CATSI Act, existing directors have two years to apply for their director ID and
new directors appointed from 1 November 2022 must apply before they are appointed directors.
If you don’t apply in time, you could face some pretty hefty penalties, including 5,000
penalty units. Try guessing how much that is. That’s one point eleven million dollars.
In other words, get the DIN Number!
The same penalties apply if a director is found guilty of conduct that undermines the
new requirements, including providing false identity information to the registrar or intentionally
applying for multiple director IDs.
So, best you get on those registrations as soon as possible.
If you have any questions about the application process or the Director IDs in general, drop
them in the comment section below.
Otherwise, remember to hit the thumbs up button and subscribe! I’ll see you next time!