Time for directors to take action
In June 2020, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019 was passed meaning all new and current directors of Australian companies must hold a unique Director Identification Number (Director ID or DIN).
From 1 November 2021, anyone in a director position must apply for a DIN within the next year or risk losing their position.
These unique identifiers are something you will keep forever and are more important than you could imagine.
What is a Director ID number?
A director ID is a 15-digit identification developed to prevent false or fraudulent director identities. Your director ID is unique to you and will stay the same whether you change companies, stop being a director, change your name or move overseas.
Why were Director IDs brought in?
Director IDs were introduced to provide traceability of a director’s relationships across companies. The Australian Government want to tackle phoenix activity and prosecute culpable directors. Illegal phoenix activity is when a new company continues the business of an existing company that has been liquidated or otherwise abandoned to avoid paying outstanding debts has been on the rise in Australia.
The Economic Impact of Potential Illegal Phoenix Activity Report found that illegal phoenix activity costs employees between $31 and $298 million in unpaid entitlements. It also costs the Australian Government around $1.6 million in unpaid taxes and compliance.
Applying for a director ID is simple and has no cost, but you must apply yourself – an accountant or financial planner cannot apply on your behalf.
How do I apply for a Director ID?
You can apply for your director ID online on the Australian Business Registry Services (ABRS) website. You will require a myGovID account which is different to your standard myGov account.
If you’re currently a director, you must apply by 30 November 2022. If you’re planning on becoming a director between 1 November 2021 and 4 April 2022 you must apply within 28 days of your appointment. Meanwhile, if you’re due to become a director from 5 April 2022, you must apply before your appointment.
While you must apply for the ID yourself, you don’t need to go at it alone. Speak to your accountant or financial advisor if you need guidance on the application process.
How will director IDs benefit small businesses?
If you’re a small business owner, like myself, it may not seem like the director ID initiative will affect your day-to-day work. However, the director IDs are one small part of the Modernising Business Registers (MBR) program being rolled out by the Australian Government.
The government want to streamline and simplify how you can register, view and maintain your business information. The program is aiming to make it easier for businesses to meet their registration obligations which will give you more time to focus on your customers and your business operations. The director IDs are part of this initiative.
As a small business owner, any time back in our day is a welcomed addition! You can learn more about the Modernising Business Registers program here.
While the director IDs aren’t changing the way we do business, it is changing the way we approach setting up a new business for the better.
How can I stay on top of business changes likes Director IDs?
The MBR program will be rolling out across Australia over 2021-2024 which means there’ll be numerous changes along the way.
It’s important you stay on top of these business changes by working with a business accountant or financial advisor who will keep you in the loop.
Working with an accountant or advisor is so much more than balancing your numbers. They’re vital to helping your business succeed and should always stay on top of the latest industry updates.