SMSF Association deputy chief executive Peter Burgess said the legislation contains an initiative which will impact SMSFs with a corporate trustee.

“This new initiative will require all directors, including the directors of a corporate trustee that acts as the trustee of an SMSF, to obtain a Director Identification Number (DIN),” Mr Burgess explained.

Mr Burgess said the new DIN regime is being introduced to deter and detect phoenix activity which occurs when the controllers of a company deliberately avoid paying liabilities by shutting down an indebted company and transferring the assets to another company.

“A person will keep their unique DIN permanently even if they cease to be a director, and it’s not intended that a person’s DIN will ever be re-issued to someone else or that one person will ever be issued with more than one,” he said.

“As such, the DIN will provide traceability of a director’s relationships across companies, enabling better tracking of directors of failed companies and will prevent the use of fictitious identifies.”

The new regime will also help regulators and external administrators to investigate a director’s involvement in repeated unlawful activity, including illegal phoenix activity, he said.

“Although the law has in the past required directors’ details to be lodged with ASIC, it has not required the regulator to verify the identity of directors,” he stated.

In order to allow sufficient time for the development of systems, processes and new technology, the DIN regime will not commence until 12 June 2022, unless an earlier date is set, Mr Burgess noted.

“All existing directors, including acting alternate directors, at this time will be given a period of time to apply for a DIN,” he said.

“A person who is appointed a director within the first 12 months of the new regime’s operation will be given 28 days to apply for a DIN. After this transitional period ends, the standard rule applies; that is, a director must apply for a DIN prior to being appointed as a director.”

This transitional period, he said, is designed to provide time for new directors to become familiar with the new requirement and for any information or awareness campaigns in relation to it to take effect.

The new regime means that from 12 June 2022, or an earlier date if one is set, SMSF establishment processes will need to be updated to ensure a person who is to be appointed as a director of the corporate trustee of the fund has a DIN.

“If the person does not already have a DIN, during the transitional period, an application for a DIN will need to be made within 28 days of their appointment as a director,” Mr Burgess said.

“After this transitional period ends, the application for a DIN must be made prior to their appointment as a director. The same rules will apply to a person who, from 12 June 2022 (or an earlier date if one is set), is appointed as a director or alternative director of a company that was in existence at 12 June 2022.”

Mr Burgess said while the need to obtain a DIN introduces an additional step for SMSFs established with a corporate trustee, it will enhance the integrity of the SMSF sector by ensuring the identity of a person who is or will be the director of a company that acts as the corporate trustee of an SMSF has been verified by a Commonwealth body.

“It should also help to ensure that those who act in the capacity of a director of a corporate trustee of an SMSF are not disqualified from doing so,” he said.