Company directors will now be required to create an identification number through myGovID that stays with them for life as the government moves to crack down on illegal phoenixing.
Illegal phoenixing occurs when "a new company, for little or no value, continues the business of an existing company that has been liquidated or otherwise abandoned to avoid paying outstanding debts, which can include taxes, creditors and employee entitlements," according to ASIC.
The identification number, also known as director ID, is a unique 15-digit identifier that existing company directors will need to apply for by September 2022 in order to avoid a civil penalty of up to $1.1 million.
It is the first public beta service to be offered by the Australian Business Register Services (ABRS), which is consolidating 32 business registers under the modernising business registers program.
The ABRS, which is overseen by the Australian Taxation Office and the Australian Securities and Investments Commission, has been delivered as part of the modernising business registers program that kicked off back in 2017.
The program received more than half the $800 million set aside for the government’s digital economy strategy in last year’s budget.
Minister for Superannuation, Financial Services and the Digital Economy Jane Hume on Monday said the director ID will reduce illegal activity, while paving the way for “streamlined experiences in the future”.
“Director ID will help to create a fairer business environment by improving data integrity, creating greater confidence in director’s identities, and allowing earlier identification of director involvement in unlawful practices, such as illegal phoenix activity,” she said
“Director ID will help to prevent false and fraudulent director identities, which ensures business owners doing the right thing get a fair go.”
Existing Corporations Act directors will have until November 30 2022 to apply for a director ID, while existing Corporations (Aboriginal and Torres Strait Islander) Act directors will have November 30 2023.
New Corporations Act directors will have 28 days to apply from the date of their appointment until April 2022, from which time they'll be expected to apply for a director ID before they are appointed.
Directors are being asked to create a myGovID digital identity before applying for a director ID, though there is also an option for directors to apply for an ID over the phone or using a paper form.
Hume said the application process has been “rigorously tested” during private beta and that testing and trials would continue in the live environment now that it has reached public beta.
According to the Treasury Laws Amendment (Registries Modernisation and Other Measures) bill 2019, directors that fail to apply for an ID face a maximum penalty of 5000 units or $1.1 million.
In September, the ATO began trialling face verification technology in its myGov digital identity credentialing app to allow users to create a “strong” identity for the first time.
Users wanting a strong myGovID are required to verify their passport, birth certificate or citizenship certificate and driver’s licence or Medicare card.
Directors will be able to create either a standard or strong identity.