The Australian Government is consistently implementing new schemes and laws to prevent phoenixing and other illegal business activity.
In the past year, the Australian Business Registry Services (ABRS) has integrated the Director Identification Number register to limit business noncompliance from flying under the radar.
But who is supposed to apply for a Director Identification Number (DIN)? And what happens if you don’t apply?
Our accounting firm in Melbourne has outlined the exact parameters for business directors and DINs.
What is a Director Identification Number?
A Director Identification Number, also known as a Director ID or simply DIN, is a 15-digit code assigned to:
- Directors of a business
- Registered Australian bodies
- Registered foreign companies
- Aboriginal and Torres Strait Islander corporations
- Public charities and non-for-profits
Your director ID will be associated with you for life, even if you change businesses, change roles, change your name, or live or move outside of Australia.
The registry plan was passed in parliament in June 2020 as a part of a 2019 Bill which indicated that 30 registers will be introduced in Australia to combat phoenixing, including the DIN.
Is a Director Identification Number mandatory?
A DIN is mandatory for business directors and the deadline to apply depends on how long you’ve been a director for the company:
If you were appointed as director on or before 31st October 2021, you have until 30th November 2022
If you’re appointed between 1st November 2021 and 4th April 2022, you need to apply by the 28th day after the day you were appointed
If you get appointed on or after 5th April, 2022, then you actually need to have applied prior to your starting date as director
Not registering by the relevant date could result in serious penalties, such as one year imprisonment or a $200,000 fine.
Is phoenix activity illegal?
Yes, it is.
Phoenix activity refers to business executives who transfer all business funds to another company they own, leaving all debts, obligations, and tax requirements to the initial company.
The rationale behind the implementation of Director Identification Numbers is that it prevents or makes it more difficult for phoenixing to occur under a business.
This is because formerly, directors of a business who register through ASIC or another Government body didn’t have to show proof of identification.
It would then become difficult for authorities to track the criminal as they would use a fake name for both businesses.
DINs also makes it more difficult for directors to:
- Transfer money to off-shore tax havens
- Avoid taxation
- Avoid tariffs
- Commit identity fraud
- Other illegal business-related activitiesPhoenixing isn’t just immoral, but it can hurt employees, as well as tax accountants in Melbourne who’ve worked with these directors unknowingly.
It is estimated that phoenixing costs the Australian Government $3-5 billion a year.
Can a company change its name to avoid debt?
Changing the name of your business will not relinquish debt or any other liabilities.
Through the tax office, you have the same ABN and tax file number, which means changing your personal name or company name won’t affect your company’s track record.
In situations like these, phoenixing arises; business directors will shut down their business, transfer their assets under another business name, and avoid tax or other debt.
Therefore, appointing Director Identification Numbers prevents this because every individual can only apply for a single DIN no matter how many businesses you work under.
Therefore, individuals attempting phoenixing can be tracked using their second business through the same DIN.
How do you register for a DIN?
The easiest way to register for a DIN is through MyGovID.
This app is different from MyGov which you use to do your taxes or view your health certificates.
Once downloaded, opening the app will imminently prompt you to apply for a Director ID.
There are a number of documents you’ll need to attach to confirm your identity and strengthen the legitimacy of who you are claiming to be.
If you don’t have an account or need help walking through the procedure, our small business accounting firm is helping both new and existing clients with their requirements.
How can I ensure my business complies with the ABRS and other Government organisations?
Speak to our accounting firm in Melbourne about keeping up to date with your business obligations
In addition to director IDs, Bruce Edmunds & Associates can also assist with a range of small business accounting services, such as:
It’s our obligation to ensure we stay up to date with all the latest changes, developments, and regulations.
So contact Bruce Edmunds before the deadline for DIN application or for any other accounting enquiries on (03) 9589 5488 or fill out this form and we will get back to you.