What the new director ID rules mean for you and your business
If you’re the director of a company and you have not registered for a director ID, you could risk a penalty of up to $1.1 million.
So, if you’re among the many directors who have not yet registered for their ID, now’s the time. The Australian Taxation Office has said penalties won’t affect anyone who applied for their director ID before 14 December 2022. Now every director is required to apply for a director ID under the Corporations Act 2001 (Cth). You will need to have a myGovID to apply for the director ID, so if you don’t have a myGovID it’s time to get one now.
“In the event a director receives a civil penalty, liability insurance may cover its cost”.
A director ID is perennial, even if the person:
- Changes companies.
- Stops being a director.
- Changes their name.
- Moves interstate or overseas.
The director ID will help prevent the use of false or fraudulent director identities and helps the government to take action against illegal activity. It’s also important so that shareholders, employees, creditors, consumers and know who are the directors of a company.
The 15-digit ID will make it easier for administrators of failed companies to track directors between companies. It’s also going to help stop ‘phoenixing’. This is when the directors of a failed company start a new company, a phoenix company, to carry on the activities of the previous company, just without the debt of the previous company.
As a company director, you must apply for your director ID yourself, your tax or BAS agent can’t apply for you. The easiest way to apply for a director ID is through www.abrs.gov.au. The ABRS is a new service the federal government has launched for managing business information. You can also apply for a director ID by filling in paper forms.
Fines apply
The maximum criminal penalty for not having a director ID when required, or failure to apply for one when directed by the Registrar, is $13,200, with civil penalties extending up to $1.1 million. Steadfast Broker Technical Manager Michael White says in the event a director receives a civil penalty, liability insurance may cover its cost. “But insurance won’t cover criminal penalties.”
It’s important to ensure you have the right insurance in place if you are a director of a business. Talk to BICS today to find out
more.
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