We have seen Treasury release for consultation, the ‘Modernising Business Registers (MBR) Program’ on 12 March 2021, which will unify the Australian Business Register (ABR) and 31 business registers administered by the Australian Securities and Investments Commission (ASIC) onto a single platform.
This platform will be administered by the Commonwealth Registrar (the Registrar) under legislation and as a separate statutory function of the Australian Taxation Office (ATO).
The MBR Program will include the introduction of a director identification number (director ID) which acts as a unique identifier that a director will retain forever. The director ID is designed to help promote good corporate conduct and deter illegal phoenixing of companies. However, the introduction of the director IDs will have a much broader role to play in more effectively tracking directors and their corporate history. For example, this will reduce the time and cost for administrators and liquidators, thereby improving the efficiency of the insolvency process, along with the new regime improving data integrity and security.
The most recent SMSF annual statistics by the ATO showed that 62.8% (at 30 June 2020) of all funds have a corporate trustee. This equates to approx. 690,000 individuals within the SMSF sector that will be required to register for a director ID, let alone individuals that will also require registration due to a member’s legal disability (e.g. incapacity, or overseas absence).
Information requested and collected for director ID
The following information may be collected for the purpose of establishing an individual’s identity and providing them with a director ID (or to update the individual’s details):
- Individual’s names and former names
- Addresses and former addresses
- Contact details
- Date and place of birth
The Registrar may request, but not compel, the individual’s TFN to establish the individual’s identity.
There may be numerous documents required to support obtaining the above information, with flexibility a key objective of the registries system, including how directors are identified.
The collection of data will be through an accredited digital identity provider to authenticate the details provided by the individual.
Application for director ID
A director can only ever have one director ID. Application for a director ID will generally be completed electronically and will be available via a website (e.g. ATO website). As part of the application process, they will be required to authenticate their identity digitally (unless the individual cannot use the electronic form).
The application must be completed by the individual themselves and cannot have an agent or third party apply for a director ID unless the Registrar is satisfied that an exception applies – this includes where the applicant may require assistance to prepare as they are unable to do so themselves (e.g. disability, injury or illiteracy).
In the first year of operation for director IDs, transitional arrangements will apply for individuals that are appointed as a director and require a director ID. An individual will have 28 days from the date of appointment as a director to apply to the Registrar.
For existing directors transitioning into this new regime, the Minister, by legislative instrument, will specify the transitional application period to obtain a director ID.
If an individual anticipates that they will become an eligible officer within the next 12 months, they may apply for a director ID.
Example – LPR appointed as director of corporate trustee
Harold is a director of ABC Super Pty Ltd, which acts as trustee for the Jones Super Fund. Due to his failing health, it is expected that his son, James, who has an enduring power of attorney (EPA) will be required to replace Harold as a director within the next 12 months.
With the proposed new director ID laws, if James does not already hold a director ID, he is eligible to apply for a director ID on the basis that he will enter into the role as director (as Harold’s LPR) within the allowable time frame (next 12 months).
Examples where individuals, other than existing directors of a SMSF corporate trustee may require a director ID:
- Member is incapacitated (e.g. cognitive decline, disability)
- Member is overseas (e.g. central management & control)
- Member is a minor (parent or guardian)
Where information in respect to the director is required to be updated, the individual will be able to request updates of their details electronically to the Registrar.
The consultation paper notes that up to 10% of Australia’s population will be required to obtain a director ID.
The individual as part of the application process will be required to complete a declaration confirming that:
- The individual is the applicant identified in the application.
- The information provided is true and correct.
- They meet the requirements to obtain a director ID, that is:
- They are an eligible officer or they intend on becoming an eligible officer within 12 months after they have applied; and
- They do not already have a director ID, or have been directed by the Registrar to apply for a director ID again.
This consultation is the first of several and focuses on the new data standard and disclosure framework which support the commencement of the director ID regime. In the coming weeks, the Treasury also intends to consult on draft legislative instruments relating to transitional application periods for directors to apply for a director ID.
These draft instruments will provide new and existing directors with an extended timeframe to apply for a director ID during the early stages of the regime. This will enable the MBR Program to test the director ID system in a live environment without disadvantaging directors that are not involved in the testing phase.
For more information about the rollout of the director ID regime, you can refer to the ‘consultations’ under the Treasury website – https://treasury.gov.au/c2021-157170
