Action required: Apply for your Director Identification Number

What is required?

As part of a new director requirement, all directors must verify their identity by applying for a unique director identification number. This includes all directors of companies, registered Australian bodies, registered foreign companies or Aboriginal and Torres Strait Islander corporations. These are given to directors who have verified their identity with the Australian Business Registry Services. All directors will need to apply for their own ID, and will keep them forever. Applications are open and are most easily done online. The process is free, and you can update your details at any time.

This ID will stay with you permanently, despite ceasing to be a director, transferring companies, moving overseas, or changing your name.

 

What is needed to apply?

You will be required to produce your MyGovID, as well as two other identity documents. These can include bank account details, super account details, ATO notice of assessment, dividend statement, Centrelink payment summary, and PAYG payment summary.

 

How long do I have to apply?

Existing directors (appointed before 31 October 2021) will have until 30 November 2022 to apply, but new directors appointed between 1 November 2021 and 4 April 2022 will only have 28 days after appointment to apply for their director ID.

New directors who are appointed from 5 April 2022 will be required to apply for their director ID before appointment.

The new Australian Business Registry Services (ABRS) is responsible for administering the director ID initiative. When you are ready, you can visit the ABRS website here and commence the application process.

 

What are the consequences of not applying or falsely applying?

If directors fail to apply within their specified time frame, they can face criminal or civil penalties of 5,000 penalty units, which currently stands at $1.11 million. Directors of a CATSI organisation can face penalties of up to $200,000. Anyone who applies with false information, or applies for multiple IDs, will also be subject to penalties.

 

Why are these IDs required?

  • Improve identification

Clear identification of a company’s director is important for all stakeholders, especially shareholders, employees, creditors and other bodies. They have the right to know the names and identifying details of company directors. For any shareholders investigating whether to buy shares in a company, it is likely they will want to check who the director is to make an informed decision and having director IDs will fast track this identification process.

  • Prevent illegal activity

In 2018, illegal activity cost employees, businesses and the government $2.85-$5.13 billion in lost wages, unpaid debts, and unpaid taxes and compliances: https://lawpath.com.au/blog/director-identification-numbers.

To help reduce this, director IDs will work to reduce false or fraudulent director identities. Identification fraud is a major problem for businesses all across Australia, and it is not uncommon for directors to use their middle names or false names for company records. Their aim is to not be legally connected to their companies to escape liability for negligent company practices. In many cases directors will steal others’ real identities to falsely and secretly portray them as the company director, to avoid a director ban or disqualification from ASIC.

A number of directors use illegal phoenix activity to avoid paying their debts owed to creditors. Phoenix activity occurs where a director transfers company assets into a new company whilst the old company is liquidated. This attempts to free the new company from the debts and liabilities previously incurred. Between 2020-21 the ATO investigated over 2,355 referrals of phoenix activity.

With director IDS, it will be extremely difficult to create false identities whilst just abandoning old companies and debts, therefore minimising the risk of phoenix activity. They will be held accountable for involvement in fraudulent activities, with all of their actions connected to their ID.

 


 

IMPORTANT NOTICE

This blog post contains general information only and has been prepared by Allworths without reference to your objectives, financial situation or needs. Allworths cannot guarantee the accuracy, completeness or timeliness of the information contained here. By making this information available to you, we are not providing professional advice or recommendations. Before acting on any of the information contained here, you should seek professional advice.

Leave a Reply

Your email address will not be published. Required fields are marked *