“Billy, Billy don’t you lose my number
’Cause you’re not anywhere that I can find you”
— Australian Business Registry Services (or Phil Collins “Don’t Lose My Number” )
What are Director Identification Numbers?
Director Identification Numbers (DINs), which came into effect on 1 November 2021, are unique identifiers obtained through Australian Business Registry Services that are required for all directors of Australian companies.
Why were DINs created?
They arose from the need to track the directors behind illegal “phoenix” companies. According to ASIC, this practice usually happens when company directors abandon the company or transfer the business of an existing company to a new company without paying true or market value, leaving debts with the old company. Once the assets have been transferred, the old company is placed in liquidation or abandoned. If a liquidator is appointed, there are no assets to recover, meaning creditors cannot be paid.
Once the assets are transferred to a new company, the directors continue to operate the business. This gives the new business an unfair advantage when competing for work, because they have less debt and lower operating costs.
Illegal phoenix activity directly impacts sub-contractors, creditors and employees as they are left unpaid and out of pocket. It also indirectly impacts the broader community because the company avoids having to pay tax, while at the same time Government often has to subsidise outstanding employee entitlements of liquidated companies.
The Economic Impact of Potential Illegal Phoenix Activity Report found that illegal phoenix activity costs employees between $31 and $298 million in unpaid entitlements and costs the Government around $1,660 million in unpaid taxes and compliance.
Who needs a DIN and why?
All directors, including directors of corporate trustees of Self Managed Superannuation Funds (SMSFs) require a DIN by 30 November 2022 if they were a director of a company as at 31 October 2021.
This does include directors of a company established for the sole purpose of acting as the trustee of an SMSF.
In its Bulletin dated 12 September 2022, the SMSF Association confirmed that the obligation to obtain a director ID also applies to anyone who was a director on or before 31 October 2021, even if they have since resigned from all directorship roles and have no intention to ever be appointed in the role of director of any Australian or foreign company.
Why do DINs matter to licensees and advisers?
At this stage, DINs are not yet reportable to ASIC and there is no requirement as yet to collect DINs for AML/CTF purposes.
We believe it will become necessary after 30 November 2022 for advisers to record DINs on their client files to ensure that they can properly identify any of their clients that are corporate SMSF Trustees.
There is also a duty under FASEA Standard 8 to keep complete and accurate records and DINs are now part of a clients’ unique identifier record.
If you have clients who are still yet to apply for their DINs, the fastest way to apply is on the ABRS website using their myGovID (which is separate to their myGov login). The ATO is responsible for issuing their myGovID, meaning the client/director must apply for their myGovID themselves so that the ATO can verify their identity.
Tracking DIN
“Won’t you please, please help me, help me, help me, ooh”
— Frustrated ASIC auditors (allegedly also attributed to The Beatles “Help Me”)
- Keep a central register of DINs for each director of an entity that you are advising;
- From a privacy perspective, DINs do not have the same protections required as individual Tax File Numbers. Accordingly, they do not need to be redacted when stored in your business registers;
- From a cybersecurity perspective, you should still protect DINs as you would any other personal or sensitive client information with best practice methods such as password manager-generated passwords and multi-factor authentication;
- If you have any concerns about a client who holds a DIN or declines to provide you with their DIN, please refer to ASIC Info Sheet 212 for guidance on how to handle potential phoenix activity and details of their tip-off line.
