As part of the Federal governments Digital Business Plan, they announced the implementation of the Modernising Business Registers (MBR) program which involves the establishment of the new Australian Business Registry Services (ABRS) that will help shape how businesses are registered in Australia. Part of this implementation will be the introduction of a Directors Identification number or Director ID. 1st November 2021 is the first important date relevant to SMSF professionals for the rollout of the Director ID and its fast approaching.
Director ID – What is it and why is it required
A Director Identification number is a unique 15-digit identifier that an individual can apply for once and they will have forever, like a Tax File Number. Directors, or individuals that want to be a director of a company, need to apply for the number themselves and have their identity verified. The application process is free, and the number will stay with the person even after they stop being a director, change their name or move overseas. The introduction of the ID is an attempt to protect shareholders, employees, consumers, creditors, and other stakeholders against fraudulent activity. The verification of identity during the application process, will prevent the use of false Director identities, make it easier for external administrators to trace directors’ activities and better identity a director’s involvement in illegal phoenix activity.
At this stage there are no plans for Director ID’s to be uploaded to a searchable public register, but the government will be consulting the public so this may change in the future.
When do clients need to apply for a Director ID?
All directors of companies that act Trustee of Self-Managed Super Funds will eventually need to have an ID. Clients can apply for a Directors ID from 1st November 2021 and when they need to apply for an ID will depend on the date they became a director. The important dates are:
Date client became a Director Date client must apply by
On or before 31st October 2021 by 30th November 2022
Between 1st November 2021 and 4th April 2022 Within 28 days of appointment
From 5th April 2022 Before appointment
How do clients verify their ID?
The government is encouraging everyone to apply for the Directors ID via an online application, but applications can also be made over the phone or on a paper form. To complete the application, clients will need:
- A MyGov account with a standard or strong identity strength.
- A Tax File Number
- Residential address as recorded with ATO
- Be able to answer two security questions based on details that the government know about the client from the following documents
- Bank Details
- Notice of Assessment
- Super account details
- Dividend Statement
- Centrelink Payment Summary
- PAYG Payment Summary
The over the phone option will be like the above and the applicant will need to be able to answer security questions correctly whilst paper application will require certified identity documents to be provide with the paper application.
Using the ID
Once the ID has been issued it needs to be passed on to each company the person is a director of.. If the Corporate Trustee is managed by an Accountant or Administrator, then the Director will need to pass the number on to them. The platforms that are used to manage corporate affairs for clients are currently in the process of being updated to able to store the new ID’s. The individual Directors can view and managed their Director IDs via the ABRS Website from November 2021, if they have a MyGov account.
Potential Impacts for Advisers
The application process may create difficulties for Advisers because they can’t apply for the Director ID on behalf of their clients. Many Directors of Corporate Trustees are older and may find the Verification of Identity process difficult on their own. Good news is that the older trustees are most likely existing Directors and Advisers will have until 30th November 2022 to get their clients ready to apply.
Corporate v Individual Trustee
Does the impositionof the Director ID make Corporate Trustees less attractive? Well, no I don’t think so. It may slow down the process of setting up an SMSF but provided you are clear with your instructions to your client this shouldn’t be enough to outweigh the benefits of a Corporate Trustee. As the Directors ID is a unique identifier, in many cases clients may already have the ID if they are Directors of another company anyway.
Other than the relatively small impact that the new ID’s will have on establishing new Corporate Trustees and transitioning existing clients, the impact of the new reforms will only have positive outcomes when it comes to protecting consumers against fraudulent activity.