Director identification numbers to combat phoenixing

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 currently before government is about rolling out director identification numbers for company directors across Australia. The concept of director identification numbers has been discussed since 2015 and is just one measure in a package of reforms intended to prevent phoenixing.

Phoenixing is illegal and occurs when a company moves assets away from company ownership or control to avoid paying out liabilities to creditors and employees on the cessation of the company, which then resumes trading as a new and separate company. Estimates have placed phoenixing as costing the Australian economy up to $5.1 billion annually.

So how would a director identification number help?
Existing company directors and persons about to be appointed as a director would need to apply for a unique director identification number (DIN). The DIN’s issued are then mapped with relevant Government agencies and databases with the result that regulators can:

    1. Better understand how specific individuals and entities are connected
    2. Track directorship history by individual
    3. Identify and flag entities and individuals presenting high risks for phoenixing.

What would I need to do if the new legislation is passed?
There may not be any action required straightway, as first the registrar will need to get their systems into place to be able to manage the new requirements. It will be up to the registrar to confirm when the legislation is actually to take effect. After that, transitional rules will apply:

    1. New directors will have to apply for a DIN within 28 days of being appointed (only for the first twelve months from the law taking effect)
    2. Existing directors will have up to 15 months to apply for a DIN (from when the law takes effect).

After the transitional rules for new directors end, persons will have to register for a DIN before they are appointed as a director.

What if I don’t register?
There will be significant civil and criminal penalties for breaching DIN requirements such as failing to apply for a DIN within 28 days of appointment or if directed by the registrar, applying for multiple DINs and/or misrepresenting a DIN. The maximum criminal penalty is 60 penalty units (strict liability), the maximum civil penalty is $200,000 for an individual or $1 million for a body corporate.

Will there be any exemptions?
There is no exemption for the DIN requirements – it doesn’t matter how long your directorship role is to last.

We will keep clients updated on the progress of this Bill and when it’s time to register. In the meantime if you have any questions we would be happy to discuss this with you – call us on 03 5339 3200 or contact us here.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

Looking For A Clear Picture
Of Your Finances?

Focus Accounting and Financial Group offer clarity and insight into your current position, as well as a reliable strategy for future success. For tailored accounting services, business advice, SMSF support and a partnership you can trust, book your free consultation today.

Location

Contact Us

Stay Informed
and Focused!

Keep up to date with all the latest news, information and commentary from Focus Accounting And Financial Group. We’ll be publishing informative articles and the latest news affecting your business.

Thank you. You should receive an email link to confirm you want to subscribe. After clicking on the link in the email your subscription will be active.