On 22 June 2020, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth)) received royal assent, which introduced the requirement for all directors of a company in Australia to have a director identification number (DIN).
The purpose of introducing DINs is to prevent the use of fictitious director identities, assist regulators trace directors’ relationships with companies and better identify directors involved in unlawful activity, such as illegal ‘phoenix’ activity. Each director will have their own unique DIN that they will keep for the remainder of their life. A director can only have one DIN that they must use for all companies.
Naturally, the requirement to obtain a DIN will apply to SMSF members who are directors or are to be appointed as directors of a corporate trustee. Alternate directors are also required to apply for a DIN.
The DIN is one part of the Federal Government’s Modernising Business Registers (MBR) program that will combine more than 30 business registers into one place that will be referred to as the Australian Business Registry Services (ABRS).
Key dates to be aware of
From 1 November 2021 to the end of 4 April 2022 there is a transitional period where all new directors have 28 days to apply for a DIN after being appointed as a director.
From 5 April 2022, when the transitional period ceases, all directors will be required to apply for a DIN prior to being appointed as a director.
For all existing directors appointed prior to 31 October 2021, they will have a deadline of 30 November 2022 to apply for a DIN.
From 1 November 2021, the DIN application process will be available at ABRS and the director applying will require a myGov ID to access the ABRS. Furthermore, they will need to provide proof of identity documentation to verify their identity. A director can choose to provide their tax file number when applying for a DIN which should expedite the application.
Directors will need to apply for a DIN themselves and their advisers will not be able to apply on their behalf. Accountants and advisers can however assist by advising their clients of the steps and timelines involved.
Summary of key timelines
|Date you were appointed a director
|Date you must apply for a DIN
|On or before 31 October 2021
|30 November 2022
|During the transitional period (1 November 2021 and 4 April 2022)
|Within 28 days of being appointed a director
|From 5 April 2022
|Prior to being appointed as a director
Under the DBA Lawyer’s company constitution, one or more successor directors can be nominated to automatically become a director(s) of a company upon a succession event (eg, loss of mental capacity or death). A successor director is a person who is nominated to ‘stand in the shoes’ of a director upon that director’s loss of mental capacity or death. However, they do not become a director until a succession event unless they are otherwise appointed as a director.
In this respect, a person (such as a successor director) can still apply for a DIN if they intend to become a director within 12 months. However, unless that person is appointed as a director within 12 months of being given a DIN, their DIN is deemed to be cancelled. This cancelled DIN may be reallocated to that same person should they later reapply for a DIN.
Thus, directors who have nominated one or more successor directors will, from 5 April 2022, need to check whether their successor director(s) should apply for a DIN (assuming they are not a director already) or whether they defer their application until a succession event occurs.
In the event that a successor director does not have a DIN, they should be prepared to apply for a DIN at short notice in the event that a succession event occurs, and timely action is required upon the loss of mental capacity or death of the nominating director. Note that the critical time for a successor director is the time an application for a DIN is made, rather than the actual granting of a DIN.
This is a matter that should be reviewed to ensure successor directors can continue to play a vital role with succession. As noted above, alternate directors are required to apply for a DIN. (We do not favour alternate directors for the reasons outlined in our article ‘Is an alternate director for an SMSF better than a successor director? Part 1’.)
All directors should apply for their DIN before the relevant deadline. Advisers will need to assist and guide their clients in respect of their DIN obligations. Prior to applying for a DIN, directors should ensure they have an up to date myGov account which is needed to apply for a DIN.
Failure to comply with the new DIN requirements may result in both civil and criminal penalties. This includes failure to obtain a DIN and providing false or misleading information.
Related Articles and Links:
- Hefty penalties for director identification number (DIN) issues – changes needed by advisers
- ABRS – Who need to apply and when
- ATO — Modernising Business Registers
- Why is it important to have a good company constitution?
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.
Note: DBA Lawyers presents monthly online SMSF training. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400. For more information regarding how DBA Lawyers can assist in your SMSF practice, visit www.dbalawyers.com.au.
By Daniel Butler, Director ([email protected]), DBA Lawyers
28 October 2021