If you are a Director of a company, a registered Australian body, registered foreign company or Aboriginal and Torres Strait Islander corporation, you are now required to have a Director Identification Number (director ID).
Key takeaway: Existing and prospective directors should consider applying for a director ID as soon as practical, to avoid inconvenience and penalties.
If you are currently a Sole Trader, there is no requirement. However, in the future, if you restructure to a company and become a director, you will need to apply for a director ID.
If you are unsure if this is applicable for you or if you are considering the most suitable structure for your organisation, book a consult with our experienced team. We can assist you to review and arranging the most appropriate structure and help you navigate your legal responsibilities running a company in Australia.
What Is A Director Id In Australia?
A director ID is a unique 15-digit identifier given to a director or someone who intends to become a director. This is a requirement under the new Part 9.1A (new regime) of the Corporations Act (2001) (Cth) (the Act), which houses the director ID requirement.
It is important to note that once you have been issued a director ID, you will keep it forever. Even if you cease to be a director. If you become a director of a subsequent company, you will use the same director ID. You never need to apply again. Your director ID is attached to you, an individual, not the company.
There are approximately a 2.7million companies currently registered in Australia, and the new registrar anticipates approximately 10% of the Australian population will be required to have a director ID.
Legislative Background Of Director ID Required by ASIC
In June 2020, the Australian Government introduced the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 (Cth) (Treasury Laws Amendment).
Part of the measures in this legislation introduced a new regime to Part 9.1A of the Corporations Act 2001 (Cth), which requires all company directors, or anyone who intends to become a director, to obtain a director ID.
The new Australian Business Registry Services (ABRS) administers the director ID regime. The Australian Securities & Investment Commission (ASIC) is responsible for enforcing associated offences.
Who Needs A Director ID in Australia?
You’ll need a director ID if you’re a director, or an eligible officer, of:
- A company
- A registered foreign company
- A registered Australian body, or
- An Aboriginal and Torres Strait Islander corporation
Per the new regime section 1272B(1) , an eligible officer is a person who is appointed as:
- a director; and
- an acting alternate director.
Built into the law is the potential in future to expand the class of officers that will require a director ID.
Why Director IDs Are Required In 2022?
The intention is that director IDs will make it easier for regulators to associate directors with companies. It is a move designed to create transparency so that key stakeholders such as shareholders, employees, creditors, and regulators know the details of the directors of a company.
According to the ATO, “the introduction of a director ID requirement is one of the Commonwealth Government initiatives to facilitate confidence, promote good corporate conduct, and to deter and penalise phoenixing activities in order to protect those who are negatively affected by such fraudulent behaviour.”
The director ID is the first service to be delivered as part of the Treasury Laws Amendment and will create a single source of trusted and accessible business data. In addition to preventing fraudulent activities, the scheme is also meant to improve data integrity and security for the business registrar.
What Is The Time Frame To Apply?
Applications are now open, and we recommend you plan ahead to alleviate the last-minute stress of finding the required documentation for your application.
If you are a director, are becoming a director, or are an alternate director of a company or other registered Australian body governed by the Corporations Act 2001 (Cth), the schedule for applying without repercussions is as follows:
- Directors appointed on or before 31 October 2021 have until 30 November 2022 to apply
- Directors appointed from 1 November 2021 to 4 April 2022 must apply within 28 days of appointment;
- From 5 April 2022, intending directors must apply before being appointed.
How Do I Apply for Director ID?
You must lodge your application for the director ID yourself, but we are here to support you and help walk you through the process if there are any issues. Directors can apply for their Director ID via the ABRS website, and there is no cost to apply.
To make an application, a Director will need to have:
- A myGovID (Note: myGovID is different to MyGov)
- Your Tax File Number
- Your Address as recorded by the ATO
- Documents to verify your identity, such as your passport
If you are a Foreign Resident Director, you may need to lodge paper forms and provide additional evidence. Gathering the correct paperwork and having it notarised is likely to be time-consuming, and we recommend you start the process as soon as possible.
What Are Compliance, Offences & Penalties?
After the application cut-off date, there will be penalties for failing to hold a director ID and for additional breaches.
Failure to meet your obligations may incur an infringement notice leading to penalties.
According to Part 9.4 of the new regime under the Act, offences include:
- Failure to have a director ID when required to do so
- Failure to apply for a director ID when directed by the Registrar
- Applying for multiple director IDs
- Misrepresenting having a director ID
Commercial Team Members
Daniel Dash and Zahra Rashedi are part of the commercial law team at NB Lawyers – lawyers for employers working with individuals and business owners on a range of matters including business sales, property disputes, estate disputes, shareholder agreements, intellectual property, litigation and taxation matters.