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Are you a director of a company? Here’s what you need to know.

Changes to company director IDs came into effect as of 1st November 2021.  New directors need to apply for their 15-digit unique identifier number within 28 days. Directors appointed on or before 31st October 2021 must secure their director ID by 30th November 2022. These changes will see 2.7 million company directors apply for a new ID, which stays with them for life. From April 2022, any new appointed director will need to get their director ID before they commence their role.

Here is everything you need to know:

Why are director IDs changing?

This change has been in the pipeline for some time. Updates to legislation were first announced in 2018, and passed in June 2020. The 2020 federal budget included funding to integrate the changes into the government’s Modernising Business Registers (MBR) program. The new ID changes are intended to curb illegal activities such as phoenixing, where a director liquidates a business and transfers its assets to continue operations with a new company. They will also prevent false and fraudulent director identities, providing data integrity and offer greater confidence in directors’ identities. A statement from Minister for Financial Services and the Digital Economy Jane Hume suggested the new system will “level the playing field for honest businesses”, saving them time and reducing red tape.

When do directors need to apply?

The date you need to apply for a new director ID is determined by when you were appointed. Those appointed as a director on or before 31st October 2021 must apply by 30th November 2022. Directors appointed between 1st November 2021 and 4th April 2022 must apply within 28 days of their appointment. Those appointed after 5th April 2022 must apply for their ID prior to their appointment.

Current directors of Aboriginal and Torres Strait Islander corporations have an additional 12 months to apply for the new ID. Those appointed on or before 31st October 2022, must apply by 30th November 2023. From 1st November 2022, directors must have their new ID before their appointment.

Who needs to apply for a new director ID?

Any person appointed as a director, or an alternate director acting in that capacity, must apply for a director ID. This applies to directors of a company, a registered Australian body or registered foreign company under the Corporations Act 2001, as well as to any Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006. Directors must apply for their own ID; others cannot apply on their behalf.

You do not have to apply if you operate your business as a sole trader or partnership. If you are a director of multiple companies, you only need to apply for one ID, unless otherwise directed.

How to apply for a new director ID

To apply, you first need to download the myGovID app and set up a myGovID account. This is separate to your myGov account, and can be done via the Australian Business Registry Services website, here.

You need to provide your tax file number, residential address as held by the ATO, and two documents to verify your identity.

According to the Department of Financial Services, once you have your myGovID account, the application takes less than five minutes. New director IDs will be provided straight away. Applications are free of charge, and are available to directors in Australia and overseas.

Directors can also apply by phone or using a paper form, if necessary. More information is available here.

What are the penalties?

Director ID obligations include applying within the applicable timeframe, or when instructed to do so; not applying for more than one director ID; not misrepresenting your director ID to any company or body; and not breaching any of these obligations. If directors do not apply on time, or meet the other obligations, they may be issued with an infringement notice. There may also be civil or criminal penalties.

It is not yet confirmed what the penalties will be, but previous draft legislation suggested they could be up to 5000 penalty units, or $1.1 million. For Aboriginal and Torres Strait Islander businesses, it is thought civil penalties will be capped at $200,000.

If you cannot apply by the deadline, you can apply for an extension via this form.

To keep up to date with the MBR program and future changes, visit ato.gov.au/mbr.

Source: SmartCompany

 

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