Deadline set for directors to apply for identity number
According to draft legislative instruments issued by the Treasury, new and existing directors must apply for a director Identification number (DIN) by 30 November 2022.
However for directors of indigenous corporations governed by the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act) the deadline has been extended to 30 November 2023.
These new dates have been set as the Federal Government prepares to launch the DIN regime.
This aims to stop illegal phoenix activity by linking directors’ names to individual permanent identity numbers that will enable a life-long trace of directorships and prevent unscrupulous people holding directorships under false names.
The Treasury expects about 10% of Australia’s 25.7m population to apply for a DIN, and the regime will be administered by the Commonwealth Registrar under a separate statutory function of the Australian Taxation Office (ATO).
Directors applying for a DIN will be required to provide the Registrar with their names, current and previous addresses, contact details, and their date and place of birth.
Applicants must prove their identity using key Australian identity documents such as a driver’s licence or learner’s permit, passport, birth certificate, Australian visa and Medicare card.
Don’t be surprised when applying for your DIN if the Registrar asks for your tax file number (TFN). You can’t be compelled to supply it. However the Registrar may ask the ATO for the TFN of anyone applying for a DIN whose identity needs verification.
Be aware any details of directorships provided to the Registrar may be authenticated by referring them to ATO client records.
Further details to be announced
We understand further details about transitional arrangements for directors seeking a DIN will be announced by the Treasury in coming weeks.
However until the draft legislative instruments are finalised and approved, directors do not need to begin applying for a DIN.
Existing directors will in due course be given a yet unspecified time frame in which to apply for a DIN.
People appointed as directors during the first 12 months of the new regime’s operation will have 28 days to apply for a DIN.
But when the transitional period ends, a person will have to apply for a DIN before appointment as a director.
Directors who fail to apply for a DIN within the appropriate specified time frame, or indulge in conduct that seeks to circumvent the regime’s requirements or otherwise undermine it – for example, by providing false identity information or intentionally applying for multiple DINs -- can expect to face substantial civil and criminal penalties.
Testing the new regime
The Commonwealth Registrar may, by the time this article is published, already have begun a testing program “to ensure the new platform delivers a robust, reliable and consistent user experience”.
It’s expected testing involving a controlled number of existing directors will end by 31 October.
Assuming this has gone well, existing directors will be required to have a DIN by 30 November 2022.
This time frame will apply for existing directors appointed before the launch of the DIN regime and those appointed during the testing program.
People who expect to be made a director after 30 November 2022 will be required to have a DIN before their appointment.
DPNs and DINs will trigger ATO action
Directors treating lodgement of business activity statements (BAS) and tax obligations with scant regard, and thereby taking advantage of a weak regulatory system to in effect use conscientious taxpayers to fund their businesses, are in for a rude shock.
We expect in coming months to see the ATO using director penalty notices (DPNs), and in due course DINs, as triggers to pursue errant directors and enable recovery of PAYG withholding, superannuation guarantee charges (SGC), net GST and WET tax.
A marked increase in ATO debt collection activity is imminent and of the utmost significance to businesses with historical tax debts.
Technological advancement of the ATO’s data-matching system means more red flags are showing more readily. For example, “luxury car, low recorded income” and as a result, directors of dodgy businesses have never been more likely to face not only loss of a company, but personal liability for its debts.
Watch this space for updates on the DPN and DIN regimes.