Hey, you! Yes, you! Do you have your Director Identification Number? If you’re staring blankly at us right now, it either means you’re not a company director – or you’re about to owe the ATO a big chunk of change.
More than a million company directors have until the end of November to get a special ID, or they could face big fines. Here’s why this is happening, and what you need to know to find out whether or not you’re on the hook.
In this article:
What is a Director Identification Number, and why is this a thing?
Do I need a Director Identification Number?
When do I need to get my Director Identification Number?
What will happen if I don’t get my Director Identification Number?
How do I get my Director Identification Number?
What is a Director Identification Number, and why is this a thing?
A Director Identification Number (Director ID) is a unique, 15-digit number given to any company director (or prospective company director) who verifies their identity with Australian Business Registry Services (ABRS).
You only need to get one Director ID, and it’ll stay with you forever, even if you change companies, quit being a director, change your name, move interstate or overseas, or fake your own death and start living a new life with your secret second family (just kidding, probably).
Director IDs have been introduced so that shareholders, employees, creditors, administrators, regulators and so on can know who they’re really dealing with – because at the moment, just about anyone can be named the ‘director’ of a company with very little proof of their identity.
The hope is that forcing directors to verify their identity will cut down, or even eliminate, ‘phoenixing’ – the act of liquidating, winding up or abandoning a company to avoid paying its debts, and then starting up a new company to continue the same business without those pesky debts.
This is basically the business equivalent of ghosting. It leaves employees missing out on wages, superannuation and entitlements, and suppliers and sub-contractors holding the bag for any money they’re owed. The ATO hates it, too, because these companies try to avoid paying taxes for themselves and their workers.
And while you probably don’t have the power to make ghosting illegal, the ATO does have the power to do something about phoenixing – so they are, by introducing Director IDs through their ABRS unit.
Director IDs will help to prevent the use of false or fraudulent director identities (a surprisingly common scam), and make it easier for the law to trace directors’ relationships with companies over time, so they can smack down dodgy directors like Whac-A-Moles when they pop up with a new grift.
Do I need a Director Identification Number?
Long story short: If you’re the director of a company or you want to become one, you’ll need a Director ID.
Long story slightly longer: You’ll need a Director ID if you’re either the director, or an alternate director acting in the capacity of a director, of:
- A company
- An Aboriginal and Torres Strait Islander corporation
- A corporate trustee, for example of a self-managed super fund
- A charity or not-for-profit organisation that is registered as a company or an Aboriginal and Torres Strait Islander corporation
- A registered Australian body that trades outside the state or territory in which it’s incorporated
- A foreign company registered with ASIC that’s carrying on business in Australia (regardless of where you live).
You won’t need a Director ID if you are:
- A company secretary but not a director (obviously)
- Acting as an external administrator of a company
- Running a business as a sole trader or partnership
- Referred to as a ‘director’ in your job title, like ‘the director of positive vibes’ or Steven Spielberg, but haven’t been appointed as a director under the Corporations Act or the CATSI Act
- A director of a registered charity with an organisation that is not registered with ASIC or ORIC to operate throughout Australia
- An officer of an unincorporated association, cooperative or incorporated association established under state or territory legislation, unless the organisation is also a registered Australian body.
When do I need to get my Director Identification Number?
Now, basically. If you became a director on or before 31 October 2021, then you must apply for your Director ID by 30 November 2022.
If you became, or are becoming, a director between 1 November 2021 and 4 April 2022, then you must apply within 28 days of your appointment. And if you become a director after 5 April 2022, then you have to apply before your appointment.
The trick here is that if you were already a director of any company on or before 31 October 2021, you only have until 30 November to apply, even if you became the director of another company after 31 October 2021. That’s because, again, you’ll only be given the one Director ID that follows you around forever – that’s the whole point of this exercise, after all.
The only exception is company directors of Indigenous corporations, who have been given an extra year – until 30 November 2023 – to apply for their Director ID.
What will happen if I don’t get my Director Identification Number?
Here’s the fun part – if you don’t get your Director ID in time, it’s actually a criminal offence, and the ATO has confirmed you could face a penalty of up to $13,000.
Better yet, if they can prove that you intentionally avoided getting your Director ID in order to skirt the ‘phoenixing’ laws (as opposed to just being lazy about it), then you could face fines of up to $1 million.
So you should probably just get your Director ID, no?
How do I get my Director Identification Number?
You can apply for your ID now. The process can all be done online, and it takes about 15 minutes if you have your passport and a driver’s licence.
Your tax, BAS or ASIC agent can help you decide if you need to apply, but keep in mind that they can’t apply on your behalf.
It has to be done by the individual, which is probably why the ATO reckons there are over a million company directors who haven’t gotten theirs yet – we’re dealing with people who are used to having other people do their paperwork for them, after all.
As we get closer to 30 November, there’s likely to be an overwhelming number of applications, so it’s probably best to beat the rush and avoid another #Censusfail situation by getting yours in ASAP.
Talk to us if you need help figuring out whether you need to apply, and apply for your Director ID here.
