Changes to company director IDs came into effect on Monday, with new directors required to apply for their new 15-digit unique identifier number within 28 days.
Directors appointed on or before October 31 have more than a year to apply, however, and must secure their new ID by November 30, 2022.
The changes will see some 2.7 million company directors apply for a new ID, which will stay with them for life as they move between companies, roles and even countries.
From April next year, new IDs will have to be in place before a director is appointed.
Here’s everything you need to know.
Why are director IDs changing?
The 2020 federal budget included funding to integrate the changes into the government’s Modernising Business Registers (MBR) program.
The new IDs are intended to curb illegal activities such as phoenixing, where a director liquidates a business and transfers its assets to continue operations with a new company.
They are also intended to prevent people creating false or fraudulent director identities, providing data integrity and offering greater confidence in directors’ identities.
A statement from Minister for Financial Services and the Digital Economy Jane Hume suggested the new system will “level the playing field for honest businesses”, saving them time and reducing red tape.
When do directors need to apply?
The date you need to apply for a new director ID depends on when you were appointed.
Those appointed as a director on or before October 31, 2021 must apply by November 30, 2022.
Those appointed between November 1, 2021 and April 4, 2022 must apply within 28 days of their appointment.
For any appointments made after April 5, 2022, directors must apply for the new director ID before they are officially appointed.
Current directors of Aboriginal and Torres Strait Islander corporations have an additional 12 months to apply for the new ID.
Those appointed on or before October 31, 2022, must apply by November 30, 2023.
For these businesses, however, there is no period in which directors will have 28 days to apply.
From November 1, 2022, directors must have their new ID before their appointment.
Who needs to apply for a new director ID?
Any person appointed as a director, or an alternate director acting in that capacity, must apply for a new director ID.
This applies to directors of a company, a registered Australian body or registered foreign company under the Corporations Act 2001, as well as to any Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006.
Directors must apply for their own ID; others cannot apply on their behalf.
You do not have to apply if you operate your business as a sole trader or partnership.
If you are a director of more than one company, you only need to apply for one director ID, unless directed otherwise by the registrar.
How to apply for a new director ID
To apply, you first need to download the myGovID app and set up a myGovID account. This is separate to your myGov account, and can be done via the Australian Business Registry Services website.
You will need to provide your tax file number, residential address as held by the ATO, and two documents to verify your identity.
According to the Department of Financial Services, once you have set up a myGovID account, the application takes less than five minutes. New director IDs will be issued immediately.
Applications are free of charge, and are available to directors in Australia and overseas.
Directors can also apply by phone or using a paper form, if necessary.
What are the penalties?
Director ID obligations include applying within the applicable timeframe, or when instructed to do so; not applying for more than one director ID; not misrepresenting your director ID to any company or body; and not being involved in any breaches of these obligations.
Those who do not apply on time, or meet the other obligations, may be issued with an infringement notice. There may also be civil or criminal penalties.
It’s not yet confirmed what the penalties will be, but previous draft legislation suggested they could be up to 5000 penalty units, or $1.1 million.
For Aboriginal and Torres Strait Islander businesses, it is thought civil penalties will be capped at $200,000.
If you cannot apply by the deadline, you can apply for an extension.
This story originally appeared on SmartCompany, and has been republished with permission.