In June 2020, the Australian government introduced the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020.
Behind that dry title, the Act, which came into force on 1 November 2021, contains a key measure that affects all company directors.
In short, anyone who is currently a director or intends to become one, has to hold a Director Identification Number (DIN) – a unique identifier that you apply for once and keep forever.
If you’re a director, you’ll need to apply for your director ID if you haven’t done so already. Likewise, if you intend to be a director, you’ll need to apply in advance with your respective “mygov” ID and two proofs of ID already stored with the Australian institutions.
From a financial planning perspective, this includes anyone who is a director of a corporate trustee or becoming a corporate trustee of a self-managed superannuation fund (SMSF).
Read a summary of the requirements and the steps you should take if you’re affected.
Modernising how business information is managed
By introducing these new regulations, the government intends to start the process of modernising how business information is collated and managed. The measures will also help combat cybercrime, fraud, and ID theft.
It creates a single source of accessible business information to help protect many different groups who have an interest in how a company is run and who is responsible for business decisions.
These groups include:
- Company shareholders
- Employees
- Company creditors
- The applicable regulators of the business.
It’s hoped that the new regulations will help reduce the incidence of fraudulent director identities being created and help eliminate illegal activity such as “phoenixing” – where an indebted company is liquidated and then reconstituted with no debts being paid.
The new Act is also intended to protect director privacy. The information provided that will be accessible to third parties will not include any personal details such as date of birth or home address.
One final benefit is that it will give regulators an overview of director relationships with businesses over time.
The timescales for implementation
The Australian Business Registry Services (ABRS) is responsible for the administration of director ID. You’ll need to apply directly to the ABRS for your DIN, and it’s free to apply.
When you must apply for your DIN depends on when you were appointed as a director:
- If you’re an existing director or SMSF trustee, you have until 30 November 2022 to apply.
- If you’re a director appointed between 1 November 2021 and 4 April 2022, you must apply within 28 days of your appointment.
- After 5 April 2022, you’ll need to apply prior to being appointed.
With approximately 2.7 million companies on the Australian Company Register, more than two million directors will need to be registered.
Enforcement is the responsibility of the Australian Securities and Investments Commission (ASIC).
The impact on SMSF schemes
As we’ve already stated, SMSF corporate trustees are also required to register. Failure to apply could result in a financial penalty of more than $1.1 million, so the new regulation will clearly become a key part of SMSF management and administration.
A measure of the potential impact can be seen in recent ATO statistics that showed that over 60% of SMSFs have a corporate trustee and that close to 700,000 individuals within the SMSF sector will need to apply for director ID.
It creates an additional layer of administration if you’re an SMSF client or trustee.
A key point to note is that you’ll need to apply personally as a third party cannot do so on your behalf.
Although the new regulations sound daunting, and the potential fine for non-compliance is sizeable, we’d advise you not to panic if you think you’re affected and need to apply for director ID.
There is a transitional period, so you have until 30 November 2022 to apply.
Get in touch
While we can’t apply for director ID on your behalf, we can certainly help you with your application by outlining what you’ll need to provide and how you go about applying.
Get in touch to find out how we can help you.
