Essentially, if you are a Director of a company, a registered Australian body, a registered foreign company or an Aboriginal and Torres Strait Islander corporation you will need a Director ID.
A Director ID is a unique identifier you will keep forever. It’s part of a plan to help to prevent the use of false or fraudulent director identities. It is a new requirement (applications for Director IDs opened in November 2021), and the new Australian Business Registry Services (ABRS) is responsible for administering the Director ID initiative.
If you are currently a Sole Trader, there is no requirement. However, in the future, if you restructure to a company and become a Director, you will need to apply for a Director ID.
Who Does This Apply To?
You’ll need a director ID if you’re a director, or an eligible officer, of:
- A company
- A registered foreign company
- A registered Australian body, or
- An Aboriginal and Torres Strait Islander corporation
An ‘eligible officer’ is a person who is appointed as:
- A Director
- An Alternate Director who is acting in that capacity
For instance, perhaps you are the appointed Director in a business you run with a partner. If you have a serious accident or medical complication, your partner may need to step up and act as Director until you are back to work. When they are appointed to act as an alternative director, they may need a Director ID.
When Do I Need To Apply?
Applications are open as of November 2021. We recommend you plan ahead and organise your application now, to alleviate any last-minute stress as you will need to coordinate supporting documentation to be submitted with your application.
The deadline or cut-off date for applying without repercussions is:
- Directors appointed from 1 November 2021 must apply within 28 days
- This affects you if you are a newly appointed Director to an existing company or if you are setting up a new company
- Directors appointed on or before 31 October 2021 have until 30 November 2022 to apply
- Essentially, if you are an existing Director
- From 5 April 2022, intending directors must apply before being appointed
- Before you can start acting as Director, you must submit your application for a Director ID
How Do I Apply?
It is important to note that you must apply for your Director ID yourself. At ASAP Solutions, we can assist you with your application, but we can’t lodge on your behalf.
Directors apply for their Director ID via the ABRS website.
To make an application, a Director will need to have:
- A myGovID (Note: myGovID is different to MyGov)
- Your Tax File Number
- Your Address as recorded by the ATO
- Documents to verify your identity
Offences & Penalties
After the application cut-off date, there are penalties for failing to hold a Director ID and for additional breaches, which you may be liable for if you don’t comply. Additional breaches include:
- Failure to have a Director ID when required to do so
- Failure to apply for a Director ID when directed by the Registrar
- Applying for multiple Director IDs
- Misrepresenting having a Director ID
Why Do We Need The Extra Paperwork?
The intention is that Director IDs will make it easier for regulators to associate directors with companies.
It is a move designed to create transparency so that key stakeholders such as shareholders, employees, creditors, and regulators know the details of the directors of a company.
This is important because it will help to:
- Prevent the use of false or fraudulent director identities
- Make it easier for external administrators and regulators to trace directors’ relationships with companies over time
- Identify and eliminate director involvement in unlawful activity, such as illegal ‘phoenix’ activity
Although a fun sounding name, illegal phoenix activity is quite a serious matter. Basically, it is when a company ‘goes under’ (for example, it is liquidated to avoid paying its debts), and a new company is then started with a ‘clean slate’ to continue the same business activities without the debt.
When this happens, the ramifications tend to hit the employees and small suppliers the hardest:
- Employees may miss out on wages, superannuation and entitlements they are due
- Suppliers or sub-contractors are left unpaid (quite often, this is small businesses with ‘smaller’ debt ledgers and limited means to collect funds)
If you have any questions about Director ID’s or the application process, please reach out. At ASAP Solutions offers a range of Tax & Bookkeeping Services. Talk to us about how we can help.