New Director ID Regulations: What they mean for You and Your Business
Did you know that if you’re a business director and have yet to register for a director ID, you run the risk of incurring penalties reaching up to $1.1 million?
Under the Corporations Act 2001 (Cth), it is now mandatory for every director to obtain a director ID. To apply for this ID, a myGovID is required. If you don’t have a myGovID, it’s imperative you organise one now.
*The Australian Taxation Office has clarified that penalties will not affect individuals who applied for their director ID before December 14, 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.
Once obtained, this director ID remains valid even if the person:
- Switches companies
- Ceases to be a director
- Alters their name
- Relocates interstate or overseas
What is the purpose and benefits of a director ID?
Implementing director IDs hinders the misuse of falsified or deceitful director identities and empowers the government to combat unlawful activities. This system also enables shareholders, employees, creditors, consumers, and others to identify company directors accurately.
The introduction of the 15-digit ID will help administrators of insolvent companies to track directors across different entities. Moreover, it will contribute to the prevention of “phoenixing,” wherein the directors of a failed business establish a new entity, known as a phoenix company, to continue the previous company’s operations without the burden of its debts.
“In the event a director receives a civil penalty, liability insurance may cover its cost”
How do you apply for a director ID?
Directors are required to apply for their director ID personally; tax or BAS agents cannot do it on their behalf. The most convenient method for obtaining a director ID is through the official website www.abrs.gov.au, a platform launched by the federal government for managing business information. Alternatively, you can submit a paper application.
Avoid Costly Penalties
Failing to acquire a director ID as required or neglecting to apply for one upon directive from the Registrar can lead to a maximum criminal penalty of $13,200. Civil penalties can escalate to as much as $1.1 million.
Ensuring you possess appropriate insurance coverage is crucial if you hold a directorial role in a business. Connect with our trusted brokers today to gain a deeper understanding of this matter and reach a tailored solution.