Editor’s note: On 30 November, it was announced that if a director lodges their Director ID application by 14 December 2022, no action will be taken in relation to the late application (i.e. no penalties).
Tax agents and advisers have next Wednesday, 30 November 2022 marked in their calendars as the date by which their director clients need to apply for a director identification number, or director ID.
The director ID regime applies to an ‘eligible officer’, who is a director, or alternate director acting in that capacity, of:
An eligible officer is required to satisfy the Registrar of the Australian Business Registry Services (ABRS) of their identify and requiring the Registrar to record a unique identifier (the director ID) for each individual who consents to being an eligible officer.
The regime commenced on 4 April 2021. The ATO has recently advised that over 1.4 million directors have now applied for their director ID. However with the total director population in Australia estimated to be more than 2.5 million, there are around one million directors who will need to apply in the next few days to remain eligible to run their companies and fines of up to $13,000. Of course, the identification requirement is also intended to have the effect of weeding out and disentitling the many ‘dummy directors’ that currently exist in the ecosystem.
However there are some classes of directors who will not be required to obtain a director ID under proposed rules. Broadly, the proposed excluded classes fall into two categories:
The following draft Legislative Instruments (the draft Instruments) were released on 15 November 2022:
Once finalised, the Instruments will effectively relieve the specified classes of persons from the obligation to obtain a director ID, by excluding them from being an ‘eligible officer’.
Comments and Submissions
Submissions on the draft Instruments are due by 9 December 2022.
Current law
The law presently provides the following transitional timeframes for certain eligible officers to apply for a director ID:
Persons who were an eligible officer prior to 4 April 2021 must apply no later than 30 November 2022.
Persons who were not an eligible officer prior to 4 April 2021, but became an eligible officer between 4 April 2021 and 31 October 2021, must apply no later than 30 November 2022.
Persons who were an eligible officer prior to 4 April 2021 must apply no later than 30 November 2023.
Persons who were not an eligible officer prior to 4 April 2021, but became an eligible officer between 4 April 2021 and 31 October 2022, must apply no later than 30 November 2023.
Proposed law
The draft Instruments propose to exclude from being an eligible officer persons who have ceased to hold any role as a director or alternate director acting in that capacity prior to:
Some eligible officers may have resigned in the transitional period, before they were due to obtain a director ID (i.e. before 30 November 2022, or 30 November 2023 for directors of Indigenous corporations). Requiring these persons to obtain a director ID would not achieve the policy intent underlying the director ID regime and would impose a compliance burden on them.
Implications for future directorships
Persons who resigned before 1 December 2022 (or 1 December 2023, for directors of Indigenous corporations) and later become a director again are only excluded from being an eligible officer for the period 4 April 2021 to 30 November 2022 (or 4 April 2021 to 30 November 2023, for directors of Indigenous corporations).
Such a person who later become a director again is not permanently excluded from being an eligible officer. They will need to obtain a director ID prior to any subsequent appointments.
Registerable Australian bodies and registered foreign companies may have corporate directors. Corporate directors are not individuals and can be sufficiently identified by their ACN or ARBN.
The instrument proposed to be made under the CA excludes corporate directors from being eligible officers. There is no equivalent provision in the instrument proposed to be made under the CATSI Act because corporate directors cannot be appointed under that Act.
To ensure that affected resigned directors benefit from this relief and do not become liable to any penalties for not applying for a director ID, the instrument for resigned directors and non-individual directors under the CA, once finalised, must take retrospective effect from 1 December 2022. The instrument for resigned directors under the CATSI Act must take effect from 1 December 2023.
The ATO has provided the following key messages and resources:
What is a director ID?
When and how to apply?
What to do with your director ID?
Resources
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