The Lifetime Director ID

The target is illegal phoenixing. Phoenixing is when directors transfer the assets of an existing company to a new company without paying full value, leaving the debts with the old company. Once the assets have been transferred, the old company is liquidated leaving creditors out of pocket. Phoenixing has a ripple effect in the community and is estimated to cost between $2.9 billion and $5.1 billion annually. The real face of the impact is to the unpaid creditors – mostly customers and contractors, unpaid employee entitlements, and the broader cost through unpaid taxes.

Once the assets are transferred to a new company, the directors then continue to operate the business in a new entity. They just set aside the problems and start again with the benefit of the good parts of their old company as a foundation.

Under the new regime, all directors will need to have their identity confirmed when they consent to being a director, so no more Justin Bieber (unless your name really is Justin Bieber!).

You will then keep this number permanently, even if you cease to be a director – the number will not be issued to another person. The result is an ID system that traces a director’s relationships across companies, enabling better tracking of directors of failed companies and prevents the use of fictitious identities.

The DIN is very broad and introduces the concept of an ‘eligible officer’. An eligible officer is a director who:

• is appointed to the position of director, or is appointed to the position of an alternate director and is acting in that capacity (regardless of the name that is given to that position); or
• any other officer of the registered body who is an officer of a kind prescribed by the regulations.

The definition picks up the concept of ‘shadow directors’ who act in the capacity of directors through influence and control but are not directors by title. That is, its feasible that someone who is not a director but is seen to be making decisions on behalf of the company can be held to account.

An eligible officer is a director of a:

• company
• registered foreign company
• registered Australian body under the Corporations Act such as an association or a charity, or
• an Aboriginal and Torres Strait Islander corporation (which are registered under the CATSI Act).

Directors will need to apply for an ID through the Australian Business Register system through their myGov account. If you do not have a myGov account, you must set one up. Your myGov account creates your digital credentials to verify who you are.

When you register, you will need to declare that the information you have provided is true and correct, you are or will be an eligible officer within 12 months, and you do not have an existing ID (or applied for one). 

Existing directors will have until 1 November 2022 to acquire a DIN (1 November 2023 for directors of corporations under CATSI). For the first year of the program, new directors will have 28 days to apply for a DIN from the time of their appointment. From the first year onward, you will need to have a DIN prior to being appointed as a director.

Unlike the existing system that merely registers information, the new regime will verify a director’s information and may utilise other sources of information such as your driver’s license and/or link to your client record held by the ATO.

The new regime will not overcome one problem area – where naive participants are encouraged to become directors in name only such as elderly parents, or a spouse. That is, the identity of that person is legitimate but their role as a director is merely window dressing and they do not fulfil the role as active participants - a situation that is not uncommon in family groups.

It’s important that anyone agreeing to be a director understands the implications. Being a director is not just a title; it is a responsibility. At a financial level, directors are responsible for ensuring that the company does not trade while insolvent. The by-product of this is that the directors may be held personally liable for the debt incurred. The director penalty regime has also been tightened up in recent years to ensure that directors are personally liable for PAYG withholding, net GST and superannuation guarantee charge liability if the company fails to meet its obligations by the due date. For many small businesses, the directors are also often personally responsible for company loans secured against property such as the family home.

Failing to perform your duties as a director is a criminal offence with fines of up to $200,000 and five years in prison.

Ignorance is not a legal defence. Don’t sign anything unless you understand the consequences.

• a standard or strong identity strength myGovID. If you don’t have one, visit How to set up myGovIDExternal link
• an individual Australian tax file number (TFN). Providing your TFN is optional but it speeds up the process
• your residential address, as recorded by the Australian Taxation Office (ATO)
• answers to two questions based on details we know about you from the following documents:
  • bank account details;
  • notice of assessment;
  • super account details;
  • dividend statement;
  • centrelink payment summary;
  • PAYG summary.

The introduction of a structured director verification system comes with greater controls and influence by the regulators to enforce the law with civil penalties of up to $200,000 in situations which include:

• Failure to register within the relevant timeframes
• Applying for multiple DINs
• Misrepresenting a DIN, and
• Accessorial liability where someone seeks to pervert the system

The failure to register when required is a strict liability and the regulator does not have to prove fault, they will simply issue an infringement notice.

If you need an extension, as soon as possible contact the Australian Business Registry service on 13 62 50 (+61 2 6216 3440 outside of Australia). Your identity will need to be established so have your documentation ready. You can also apply for an extension using the paper form. (https://www.abrs.gov.au/sites/default/files/2021-10/Application_for_an_extension_of_time_to_apply_for_a_director_ID.pdf)

If you are required to obtain a director ID but don’t, a criminal penalty of up to $13,200 might apply or a civil penalty of up to $1,100,000. Where an individual has deliberately applied for multiple IDs or misrepresented the director ID, the criminal penalty escalates to $26,640 and up to one year in prison.