By Abigail Murison

Director identifier numbers are now being introduced in Australia to help combat directors using fake identities and crack down on illegal phoenixing. Applications for the unique identifier, which a director applies for once and keeps forever, will open in November with Australian Business Registry Services (ABRS).

Importantly, directors – even foreign directors – will have to apply for the director ID identity themselves. Business advisers, such as their accountants, and admin staff cannot apply on a director’s behalf.

Directors of multiple companies will only have to register once and maintain one director ID record.

“Up until now there haven’t been a lot of controls over establishing corporations and appointing office holders,” says Sian Sinclair CA, tax partner with Grant Thornton Australia and its national head for Real Estate & Construction.

“The new director ID now requires you to prove who you are and it’s putting real rigour around the process of who can be a company director.”

“The new director ID now requires you to prove who you are and it’s putting real rigour around the process of who can be a company director.”

With a 30 November 2022 deadline, most existing company directors have 12 months to get their director ID in place. Existing directors of Indigenous or Torres Strait Islander corporations have until November 2023.

New directors, however, have to move faster. In a transition period from November 2021 until April 2022, any new director must apply for an ID within 28 days. From 5 April 2022, new directors need to have applied for their ID before being appointed.

Who needs a director ID?

Directors and alternate directors of Australian companies, Aboriginal and Torres Strait Islander corporations, registered Australian bodies and registered foreign companies all require a director ID.

People operating as sole traders or in partnerships, and company secretaries who aren’t directors, don’t need a director ID.

Applicants need a myGovID, some information the Australian Taxation office (ATO) already holds (such as a tax file number and residential address), plus supporting documents to verify their identity. ABRS recommends applying online, but you can also apply for a director ID over the phone or with paper forms, if required.

“ABRS says providing your tax file number can simplify the process,” says Sinclair. “They can’t mandate that you give a tax file number, but they can request additional information until they’re satisfied you are who you say you are.”

Foreign directors may face challenges

Foreign directors of Australian companies may find it more time consuming.

Says Sinclair: “Those who have had dealings in Australia previously may have a tax file number but, if not, they’re going to need to go through an extensive process to prove their identity to be able to continue to act in the role of office holder, and there are pretty hefty penalties if they don’t get around to it.”

Sinclair adds that foreign directors have some additional challenges, including getting documents correctly certified and using an approved translation service for non-English documents.

“It’s going to be a lot of hassle for foreign directors,” she says. “I don’t look forward to having that conversation with some clients. I absolutely agree with the rigour that’s required, but it’s going to be an administrative nightmare for some.”

Get across the director ID application now

For CAs who are advising clients – or who are directors themselves – it’s important to get across the director ID application process and deadlines now.

Sinclair says firms have to consider how they can assist their clients, even though they can’t apply for other people’s director IDs directly. “We’re an important part of the education piece.”

“A lot of the time directors are entrepreneurs. They’re the kind of people who are doing all their business on their mobile. They’re not sitting down in front of a computer completing forms.

“Normally, this is the stuff they would outsource to advisers or their in-house teams and we’d say, ‘we’ve put in all your details, just sign here’. That can’t happen in this instance.”

She adds: “There are penalties involved, so exercise caution when you are assisting people in going through this process and ensure they haven’t been through the process before. You will need to have a methodical approach to making sure everybody has been made aware of and met their obligations by the deadline date.”

So far, only the participants in the pilot project know how quickly director IDs are issued, and to what extent delays may arise from having to apply for a director ID in advance of establishing new companies to take advantage of a market opportunity.

“I expect that once I fill in all my details, it’s like a tax file number and the director ID may be issued instantaneously, unless there are roadblocks with your identification documents,” says Sinclair.

Simplifying business registrations

Australian Business Registry Services (ABRS) combines the Australian Business Register with ASIC’s 30-plus registers. Established as part of the Australian government’s Modernising Business Registers program, it will simplify how companies register and update their business information with the authorities.

The director ID program is one of the ABRS’s first initiatives. The new system should improve the integrity of the business register, making it easier for the authorities and creditors to track and contact a director, and prevent the use of fake identities and illegal phoenixing.

Find out more:

Visit the ABRS website for more information and to apply for a director ID.