Director identification number is now a legal requirement

This article was current at the time of publication.

Practitioners with clients who are company directors might need to remind them that a director identification number (director ID) is now a requirement under law.

This applies to the current 2.7 million directors of public entities, large and small private companies and all corporate bodies registered under the Corporations Act 2001. It also applies to prospective directors.

Sole traders, partnerships, or trusts need not apply unless the trust has a corporate trustee administering self-managed superannuation funds.

Applications should be made through the newly minted Australian Business Registry Services (ABRS). By 2024, ABRS will combine more than 30 Australian Securities and Investments Commission (ASIC) registries and the Australian Business Register into one place.

Why the change? 

Behind the move are efforts to stamp out the use of false and fraudulent director identities and illegal phoenix activity. The shift is central to the implementation of the Modernising Business Registers program.

Director identities are not currently verified, with information stored across multiple registries where names and addresses may vary depending on the register. This can lead to duplications or mismatches.

Further, the 30-year-old legacy technology offers a poor user experience, making the process expensive.

While ASIC currently interacts with companies – not individual directors – the 11-digit director ID belongs to the individual. Like a tax file number, it will be kept for life, regardless of whether a person changes directorships, stops being a director, changes their name, or relocates internationally. 

“The ABRS will be the single source of truth,” ABRS Director of Director ID Onboarding Robin Hayes noted in a recent CPA Australia webinar (see breakout).

How to apply

Application is free and most people will apply for a director ID online via ABRS using a myGovID login. Applicants will need to conduct a “proof of ATO record ownership” (PORO) by supplying their tax file number, the address registered with the Australian Taxation Office and answering two questions that can be matched against the agency’s information.

When applying online they will receive their director ID instantly. Directors living overseas can also apply online provided they can verify their identity with myGovID.

Phone and paper-based applications are available if needed. 

When to apply

The application process opened on 1 November 2021 and some 88,000 directors received their director ID within the first few weeks. However, those who were directors on or before 30 October 2021 have a year’s grace until 1 November 2022.

Anyone taking up directorships between 1 November and 4 April 2022 has 28 days to apply. From 5 April 2022, new directors must have director ID before assuming the role.

Current directors of Aboriginal and Torres Strait Islander corporations need to apply by 30 November 2023. From 1 November 2022, new directors must have their director ID before the appointment, although the timing is up for consultation.

How can practitioners help?

Absolute Accounting Services principal and member of CPA Australia’s National Public Practice Advisory Committee, Gavin Swan FCPA, believes practitioners should be encouraging clients to initiate the process. While accountants can offer guidance, it’s up to directors to formally apply for their director ID. 

“The feedback from my director clients who’ve already got their director ID is that it’s a relatively easy process,” Swan says. 

“You just [have to] master your myGovID. When you apply, also have some source documents such as a notice of assessment ready, because you will need proof of record ownership. PORO is a term we are all going to know and love.”

For those of his clients yet to apply, Swan, an ASIC agent, is sending out an information sheet on the process with the annual company review. 

“Don’t look upon it as an impost,” he says. “It’s also a chance for practitioners to make sure all client details are up to date. It’s a conversation we need to have with clients – particularly in states that are emerging from lockdown – when we finally get a chance to see them in person.”

What comes next?

Records can be kept individually or by the person maintaining company files. Practitioners can help but Swan says he is encouraging clients to print or create a PDF record of their director ID and store it safely. 

“There’s no requirement at present to declare your director ID and ASIC forms have no space for the number. We are waiting on ASIC and digital software providers for that.”

A decision on whether director IDs should be publicly available when ASIC registers move to ABRS is yet to be made but it will be open for public consultation. 

Compliance

During the webinar, Hayes said compliance with the new order is “not about using a stick at this point”. 

Instead, the initial regulatory focus will be on “multiple efforts” to encourage uptake of director ID.

CPA Australia’s on-demand director ID webinar

This on-demand webinar covers the background of director ID, the types of entities it covers, key dates, the application process, how agents can support their clients plus insights into the future of registry information and compliance. 

Robin Hayes, Director ID Onboarding at Australian Business Registry Services, Gavin Swan FCPA, principal of Absolute Accounting Services, and insolvency expert Andrew Allemand ASA from SV Partners discuss the latest on the rollout of director IDs and what CPA Australia members, directors and practitioners need to know.

Access the webinar here and enter the password: CPAAustralia2021