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Director ID applications due soon and proposed exclusions

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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:

  • a company registered under the Corporations Act 2001 (CA), or
  • an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).

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.

Proposed exclusions for resigned and corporate directors

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:

  • resigned directors
  • corporate directors.

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.

Proposed exclusion for resigned directors

Current law

The law presently provides the following transitional timeframes for certain eligible officers to apply for a director ID:

Transitional period for existing eligible officers under the CA:

Persons who were an eligible officer prior to 4 April 2021 must apply no later than 30 November 2022.

Transitional period for new eligible officers under the CA:

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.

Transitional period for existing eligible officers under the CATSI Act:

Persons who were an eligible officer prior to 4 April 2021 must apply no later than 30 November 2023.

Transitional period for new eligible officers under the CATSI Act:

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:

  • for directors under the CA1 December 2022
  • for directors under the CATSI Act1 December 2023.

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.

Proposed exclusion for corporate directors

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.

Dates of effect of the finalised instruments

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.

ATO key messages

The ATO has provided the following key messages and resources:

What is a director ID?

  • A director identification number (director ID) is a unique identifier directors apply for once and keep forever
  • Over time, director ID will help build a fairer business environment by preventing the use of false and fraudulent director identities
  • Directors must apply for their own director ID so they can verify their identity
  • Clients may have seen our recent director ID advertising campaign and contact their tax representative for advice or information
  • As trusted advisors, you can help your clients by providing guidance or helping them obtain documents to complete proof of record ownership however you cannot apply on their behalf

When and how to apply?

  • Directors of companies in Australia need to apply for a director ID by 30 November 2022.
  • There are some exceptions to the 30 November 2022 deadline for directors of a corporation registered with ASIC
  • The fastest way to apply for a director ID is online at gov.au/directorID
  • To apply online, directors require a myGovID with at least a Standard identity strength
  • Directors can streamline their online application by setting up their myGovID with a Strong identity strength
  • For more information on setting up myGovID, visit https://www.mygovid.gov.au/set-up
  • If a director is unable to set up a myGovID, there are alternate ways to apply. See How to apply if you cannot get a myGovID

What to do with your director ID?

  • After receiving your director ID, keep it safe until you need to use it. You can provide your director ID to the record-holder in your company such as the company secretary, another director, or the authorised agent of the company.

Resources

Picture1
Image credit: ATO

Further resources and training

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements. We present these monthly online, and also offer face-to-face Public Sessions at 16 locations across Australia.

Our 2023 registrations are now open! Save up to 25% by registering for a full series of your choice (tax workshops or online training)

Link To Table (2)

Online training

December Tax Update | registrations >

Personalised training options

We can also present these Updates at your firm or through a private online session, with content tailored to your client base. Call our BDM Caitlin Bowditch at 0413 955 686 to have a chat about your specific needs and how we can assist.

Learn more about in-house training >

The post Director ID applications due soon and proposed exclusions appeared first on TaxBanter Pty Ltd..

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