Director Identification Numbers and Application Process Explained
Elvis Presley. Homer Simpson. Bob Marley. Mickey Mouse. Porky Pig. What do they all have in common? Thanks to a previous lack of verification required by ASIC, they’ve all been fraudulently recorded as directors of companies within ASIC’s registry.
A new regime, created by the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth), seeks to correct this issue and, amongst other things, combat illegal phoenix activity, through the introduction of unique 15 digit permanent Director Identification Numbers (DINs).
- Upon commencement of the regime on 1 November 2021, all new directors and alternate directors of Australian companies, registered Australian body corporates and registered foreign companies must now apply for and obtain a DIN prior to their appointment.
- There is a 12 month transitional period for all directors appointed on or before 31 October 2021, which requires those directors to apply for and obtain a DIN no later than 30 November 2022.
- On applying for a DIN, a director’s identity must be verified.
- A director must not apply for multiple DINs, deliberately provide false information to ASIC, or misrepresent their DIN once it has been issued to them.
- Civil and criminal penalties apply to any director found to be in breach of their obligations under the new regime. The penalties vary depending on severity, and may include imprisonment and/or harsh monetary fines.
- At this stage, the regime does not apply to shadow directors, de facto directors, or company secretaries. However, the legislation provides a power to extend the requirement to other officers by regulation.
Who is in charge of the regime’s operation?
DINs are recorded in a new database, which is administered and operated by Australian Business Registry Services (ABRS), which is a new entity managed by the Australian Taxation Office (ATO).
The ABRS has the power to provide, record, cancel and re-issue an individual’s DIN. However, the exercise of this power is not discretionary – the Registrar must issue a DIN to any individual who is eligible and who has sufficiently verified their identity.
Directors will not need to reapply for a DIN when they change companies or personal details (i.e. name and address), or when they retire as a director. In other words, once a DIN is issued to an individual appointed to act as a director, the DIN will remain with that individual for their lifetime, including if they cease to remain a director.
Who must apply for a DIN?
The new DIN requirements apply to an individual appointed to the position of director, or an individual who is appointed to the position of alternate director and is acting in that capacity (regardless of the name that is given to that position), of a “registered body”.
Under the regime, a “registered body” is:
- A company, registered foreign company or registered Australian body (which is registered under the Corporations Act 2001 (Cth)), and includes companies that are responsible for managed investment schemes and registered charities; or
- An Aboriginal and Torres Straight Islander corporation (which is registered under the CATSI Act).
Should an individual who intends to become a director within the next 12 months apply for a DIN, but not be appointed within 12 months of receiving the DIN, that DIN will automatically be cancelled.
Other officers such as company secretaries do not have to apply for a DIN (although new provisions permit the regulations to extend the requirements to other officers). Unincorporated entities are also not covered by the regime.
Are there any exemptions?
You will not need to apply for a DIN, if you are:
- a company secretary (but not a director);
- running a business as a sole trader or partnership;
- referred to as a ‘director’ in your job title but have not been appointed as a director under the Corporations Act or the CATSI Act;
- acting as an external administrator of a company;
- a director of a registered charity with an organisation type that is not registered with ASIC to operate throughout Australia; and
- an officer of an unincorporated association, cooperative or incorporated association established under state or territory legislation, unless the organisation is also a registered Australian body.
What are a director’s obligations?
There are four general but key obligations under the regime, namely:
- A new director must apply for a DIN prior to being appointed as a director, or, for those individuals already appointed as a director on or before 31 October 2021, by no later than 30 November 2022.
- A director must not knowingly apply for multiple DINs.
- A director must not knowingly give false or misleading information to the ABRS.
- A director must not intentionally misrepresent a DIN of themselves or any other individual, to a Commonwealth body, company or registered body.
How can an individual apply for a DIN?
All directors must apply for their DIN personally, no one can apply on their behalf, as they must undergo a verification of identify.
There are three methods for applying for a DIN:
- By completing an online application through the ABRS website. Applicants can use this method if they are Australian citizens with an Australian tax file number and a myGov ID. Applicants will also need to provide their residential address as recorded with the ATO, and two other identifying details based on information held by the ATO (i.e. bank accounts, tax payments, superannuation accounts and dividends).
- By phone. Applicants can access this method using their tax file number, where they do not have a myGov ID. Applicants will also need to provide their residential address as recorded with the ATO, two other identifying details based on information held by the ATO, and details of two Australian identity documents (i.e. (1) Australian Passport of birth certificate, Australian citizenship certificate, Immicard or Australian visa (if using a foreign passport but resident in Australia), and (2) either an Australian driver’s licence or Medicare card (with the details matching their application)).
- Using a paper application form available on the ARBS website. This is most commonly used by applicants with no tax file number. Applicants will need to complete the form and provide copies of two identity documents certified as a true and correct copy of the originals (i.e. passport, birth certificate or Australian citizenship certificate) and either a Medicare card, driver’s licence, national photo ID card or foreign government ID (with details matching their application). If any identity documents are not in English, certified transactions completed by an approved translation service must be provided.
What are the penalties for non-compliance?
Directors who fail to apply for a DIN within the applicable timeframe face possible civil and criminal penalties.
Civil and criminal penalties will also apply to any director who otherwise undermines the new DIN requirement (i.e. deliberately providing false information as to identity, intentionally applying for multiple DINs or intentionally providing a false DIN to a Government body or relevant body corporate).
The penalties for such breaches vary, depending on the obligation breached and the severity of the obligation breached. Penalty units are applied at (currently) $222.00 per unit, up to a maximum of 5,000 penalty units (or $1,110,000.00), and terms of imprisonment are issued for some offences.
If you require advice or assistance in preparing for this regime change, contact us today. We would be happy to discuss in more detail the obligations and compliance requirements for your company and its directors.
Craig Higginbotham and Lynette Prichard
1 July 2022