Published by Accountants Daily, powered by MOMENTUM MEDIA
Written by Philip King on 6 October 2022
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With two months to the deadline, most company directors have yet to apply for their identifier and many remain confused about the system.
Around 1.6 million directors — almost two-thirds of the total — had yet to apply for an ID number with just two months to go to the 30 November deadline, figures from the ATO revealed.
The Tax Office said more than 900,000 directors had applied for their unique 15-digit identifier as at 30 September, from an estimated population of about 2.5 million.
The director ID scheme, which is one of the early steps in digitising and integrating all of Australia’s business registries, was vital to prevent fraud and reborn, or phoenix, companies arising from the ruins of failed operations, it said.
“Director ID is being introduced to help combat illegal phoenix activity and will enable traceability of a director’s relationships across companies and over time,” the ATO said. “Director ID will also help prevent the use of false or fraudulent director identities.
“If you are a director of a company in Australia, you are required to apply for a director ID by 30 November 2022. The Australian Business Registry Services is encouraging all directors to apply now to beat the rush.”
Failure to have a director ID when required to do so or failure to apply when directed by the registrar can carry a maximum criminal penalty of $13,200 or up to $1,100,000 under civil law.
One possible reason for the slow take-up rate is the need for directors to apply in person — accountants or other finance professionals are unable to do so on their behalf “unless the registrar is satisfied that the individual cannot apply themselves”, the ATO said.
To apply online, directors need to already have a unique myGovID, with at least a standard level of identity check, prior to starting the process.
The ATO said almost nine out of 10 directors were applying online, and the ID number was granted instantly. Non-digital options were available to those unable to apply online, it said, and the ID is free.
Different deadlines also applied to directors of companies registered with the Office of the Registrar of Indigenous Corporations.
The ATO and the ABRS said during the transitional period to director IDs the focus was on education and raising greater awareness of director’s obligations and it had begun a communication campaign to get people involved.
“We want to support directors to apply and do the right thing. We have commenced contacting directors who have been identified as needing to apply for a director ID, our response rates to these communications have been positive,” the ATO said.
However, confusion about the system remains, with many directors of companies acting as corporate trustees for SMSFs unaware of their need to get the identifier, according to Accountants Daily sister brand SMSF Adviser.
The ATO also confirmed to the SMSF Association that there was an obligation to obtain a director ID by anyone who was a director on or before 31 October 2021, even if they had since resigned and had no intention of being a director again.
In response to confusion over whether this might involve deceased directors as well, the ATO said the “ABRS will not require an application for a director ID in respect of directors who have subsequently died and nor will we issue a director ID where the person’s records indicate they are deceased.”
Meanwhile, the Australian Restructuring Insolvency & Turnaround Association recently sought clarification about the status of directors who fail to get IDs.
The ABRS responded:
“1. If a director does not have a director ID:
a. Will the director lawfully remain a director?
Yes — provided that they were lawfully appointed.
b. Will their actions/decisions be valid?
Yes — provided that their actions/decisions are lawful.
c. Will a director appointment made after 30 November 2022 be valid?
Yes — provided that the appointment is lawful.
2. However, a director must also comply with their director ID obligations under the Corporations Act 2001.”
While actions and decisions taken by directors remain unaffected by whether they have an ID or not, the ABRS cautioned that: “Civil and/or criminal penalties may apply for failure to have a director ID. Civil penalties may also be applied to a person (such as a tax agent) who is ‘involved’ in a contravention of the director ID requirement.
“The Registrar can direct a director to apply for a director ID. Civil and/or criminal penalties may be applied for failure to comply with such a direction.
“Civil penalties may also be applied to a person (such as a tax agent) who is ‘involved’ in a failure to comply with such a direction.”
The ATO confirmed the registrar did have the power to take firmer action if “a director’s behaviour is egregious or demonstrates an unwillingness to comply with the requirements to obtain a director ID”.
