Being confident in the identity and legitimacy of the businesses you deal with as an employee, customer or investor should be a given. But with ever evolving business models, complex supply chains and fintech innovations, it has become more challenging for businesses to keep up with sophisticated criminal activities.
In 2017 the Australian Government had the foresight to establish a package of reforms targeting the “black economy” and related criminal activities, particularly Australian Business Number identity fraud. Unsurprisingly small businesses were the most vulnerable to these types of crimes, as ‘business identity’ is intimately linked to ‘individual identity’.
By mandating the Director Identification Number (DIN) or ‘Director ID’ requirement in 2021, the Government has taken a critical step in shoring up the risk to small businesses and curtailing avenues for criminals.
Here’s what you need to know.
What is a Director Identification Number?
A Director ID is a unique 15-digit code that a company director will keep forever. It will be used to confirm an individual’s identity and trace their relationships to companies, helping to prevent the use of false or fraudulent director identities.
Directors need to apply for their own ID. It is free to apply and a swift process online, and you will only ever have one Director ID, even if you:
- Stop being a director.
- Change companies.
- Change your name.
- Move interstate or overseas.
How does this impact me?
The Australian Business Registry Services (ABRS) requires all company directors to obtain a new Director ID – present and future.
This means any individual who is a director or acting as an alternate director must register and this includes SMSF directors or those of a limited recourse borrowing (LRBA) corporate trustee.
Why you need one
Firstly, this is a legal requirement. It applies to all directors of a company, registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation.
Secondly, but equally important from a ‘good business’ point of view: shareholders, employees, creditors, consumers, external administrators, and regulators are entitled to know the names and key details of the directors of a company.
Thirdly, by verifying your identity through this process, a Director ID will protect you by:
- Preventing the use of false or fraudulent director identities.
- Making it easier for administrators and regulators to trace your relationships with companies over time.
- Identifying and eliminating your involvement in unlawful activity, such as illegal phoenixing.
It’s worth noting, the consequences of fraud, identity theft and ‘phoenixing’ never affect one person or one business:
- Employees miss out on wages, superannuation and entitlements.
- Suppliers or sub-contractors are left unpaid.
- Other businesses are put at a competitive disadvantage.
- The community misses out on revenue that could have contributed to community services.
When do you need to apply?
From 5 April 2022, new directors must apply for a Director ID before being appointed. Additional information can be found on the ASIC website.
Fines for non-compliance
It is a criminal offence if directors do not apply on time or who don’t otherwise comply with the legislation and could face harsh penalties under the Corporations Act 2001.
How to apply
You can apply for a Director ID online via the Australian Business Registry Services (ABRS) website and then logging in using the myGovID app to complete the application process by verifying your identity.
How Falanga & Co can help
While we can’t apply on your behalf, we will securely save your Director ID number against your client profile and answer any questions you might have about the application process. Please get in touch as the deadline for obtaining a Director ID is almost here.
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