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New System To Track Dodgy Directors: Australian Taxation Office

Tax Commissioner Chris Jordan explains how a new ID system will help track down illegal activity among dodgy directors.

CANBERRA, Australia — The tax office is cracking down on dodgy company directors with a new identification system that will stick with them for life.

Tax Commissioner Chris Jordan will oversee the new regime as part of a national business registry system.

The program aims to make it easier for businesses to meet their registration obligations — leaving them with more time to focus on their customers and business operations. Further, it makes business information more trusted and valuable and hence helps improve the efficiency of registry service transactions.

It aims to modernize and streamline the company registry, bringing together dozens of records held by the corporate regulator and the agency responsible for Australian Business Numbers or ABNs.

Tax Commissioner Chris Jordan said, it would be a tool in the fight against illegal phoenix activity. (Tom Compagnoni/AAP Image)

An ABN is a unique 11 digit number that identifies your business to the government and community. One can use an ABN to identify your business to others when ordering and invoicing, avoid pay as you go (PAYG) tax on payments you get, claim goods and services tax (GST) credits.

ABN can also be used to claim energy grant credits and get an Australian domain name.

“Under this modernized system, businesses will be able to register a business and maintain the details of those registrations in one location,” Jordan said at a Senate hearing on June 2.

One of the new tools will be a director identification number. A director identification number (director ID) — is a unique identifier that a director will keep forever.

“Those numbers will stay with directors for life, even if they stop working as a director, change their name, or move interstate or overseas,” Jordan said.

He claimed that it would be a tool in the fight against illegal phoenix activity, where dodgy executives strip down their businesses and transfer assets to others, avoiding paying outstanding costs.

Illegal phoenix activity is when a company is liquidated, wound up, or abandoned to avoid paying its debts. A new company is then started to continue the same business activities without the debt. When this happens, the employees miss out on wages, superannuation, and entitlements.

Also, other businesses are put at a competitive disadvantage, suppliers or sub-contractors are left unpaid, and the community misses out on revenue that could have contributed to community services.

“The direct impact of illegal phoenix activity is estimated to be up to five billion each year,” he said.

“We do want to make it easier for businesses to comply with their obligations, but we do want to make it difficult for those who seek to corrupt the system. The (register) is a great way to help us to do just that.”

(Edited by Vaibhav Vishwanath Pawar and Pallavi Mehra)