Head of Education & Content
The director ID regime is a new initiative requiring all company directors to have a unique identification number. Its primarily purpose is to deter and detect phoenix activity by ensuring directors can be traced across companies and preventing the creation of fictitious identities.
Who will be impacted?
Any individual is who is a director of an Australian company will, in time, be required to apply for a director identification number, called a director ID.
In an SMSF context, this includes:
- the directors of the corporate trustee of an SMSF, as well as
- persons appointed as an alternate director and acting in that capacity.
The law does not currently cover company secretaries but may be expanded to do so in the future.
What is the timeframe for making application?
Whilst the law to give effect to the regime was passed in June last year, it is not currently operational. This is because a new information technology platform and systems had to be developed before the changes could be implemented. Live testing of the new technology systems will begin shortly and is expected to be completed by 31 October 2021.
Eventually, a prospective director will be required to apply for their director ID before their first appointment as a director. However there are transitional rules for existing directors depending on when they were appointed as shown in the table below.
|Individual was appointed as a director:
|Must apply for a director ID by:
Before the end of the testing period (expected to be 31 October 2021)
30 November 2022
Within 12 months of the end of the testing period
28 days after their appointment
After the end of the 12 month transitional period
Before their appointment as a director
What is the proposed application process?
The preferred means of applying for a director ID will be electronically however we understand there will be a paper based system for those unable to apply electronically.
The first step in the application process will be verifying the individual’s identity. This is because, whilst details of a company’s directors must be lodged with ASIC under the current system, ASIC is not required to verify the identity of those directors.
It is expected that individuals who don’t currently have a “digital identity” (eg they don’t have a myGovID) will need to do so before they can apply for a director ID.
Further details will become available over the coming months, but existing directors should be aware that they will be expected to complete the director ID application form themselves. Agents or other third parties won’t be able to apply for a director ID on behalf of clients as the process is all about proving identity.
Eligible applicants will be limited to:
- existing directors, and
- individuals who intend to become a director within 12 months (a director ID issued to a prospective director will be automatically cancelled if they don’t become a director within 12 months of being given a director ID)
Will directors of corporate SMSF trustees need a director ID that is specific to that company?
No – in fact the whole idea is that a director ID will identify when a particular person is a director of multiple companies. Think of the director ID as being similar to a Tax File Number – even people who have multiple jobs give each employer the same personal TFN.
What should I be doing now?
As the new rules are not currently operational, there is not a lot that can be done now. However, we suggest you:
- review your current systems to ensure they are able to capture and store this new identity number, particularly if you are using bespoke systems,
- ensure clients who don’t already have a digital identity have the proof of identity documents they will need to apply for one (eg driver’s licence, passport, birth certificate, medicare card etc), and
- start thinking about how your internal processes might need to change (eg eventually a director ID will need to be obtained before the corporate trustee of an SMSF can be created which may mean the process of establishing an SMSF takes longer).
But don’t let this new regime encourage your clients to setup individual trustees. There are a number of great reasons why a company is still the right way to go.
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