Eleventh hour extension for ATO director IDs
The Tax Office is giving company directors an extra two weeks to apply for its new compulsory director ID program, with around 700,000 yet to sign up ahead of the original deadline on Wednesday.
The director ID is a unique 15-digit identifier that from Wednesday is a requirement for all directors. It has been introduced as part of the troubled modernising business register program and a key anti-fraud measure.
Obtaining the life-long ID requires directors to verify their identity with the Australian Taxation Office through a myGovID. The ATO expects director IDs to limit the $5 billion lost to illegal phoenix activity each year.
Failure to obtain an ID could attract penalties or offences, but the tax office is promising a “reasonable” approach to supporting applications and a “pragmatic” approach to compliance,
In a statement released on deadline day, ATO Commissioner of Taxation Chris Jordan said no action would be taken against directors in relation to their application if they apply for an ID by December 14.
“Over 1.8 million directors have now applied for their director ID, with almost 78,000 directors applying in one day alone on 29 November 2022,” he said in a statement.
“But with the total director population in Australia estimated to be more than 2.5 million, this means around 700,000 directors still need to apply.”
The director ID is a key plank of the ATO’s modernising business registers program. The program received an additional $166.2 million in the October budget, including $86.2 million to administer the director ID component.
The former Coalition government began the modernising business register project in 2019 to replace dozens of business registers, including the 30-year-old Australian Business Register, with a single platform operated by a one-stop shop service called Australian Business Registry Services.
In July, the new Labor government revealed the project would cost another $1 billion to complete after being told by Treasury that the project was “not properly resourced, behind schedule, and over budget”.
The ATO was subsequently given another four years to complete the overhaul after it became clear the new registry platform would not be ready.
Around half of funding allocated before the October Budget had been spent outsourcing key functions of the project, with consulting giant Accenture brought in for the bulk of the work and billing the ATO more than $70,000 a day.
Is the Directors’ Digital ID Even Legal? Should You Simply Say No
Install an app, tap a button to have our system generate a random number or we will fine you $13,000. Instead of doing our job and assigning you one ourselves if it's so important to security.
Opinion pieces don’t necessarily reflect the position of our news site but of our Opinion writers.
I have not received any formal notification regarding Director’s ID from ASIC, ABRS, or from my accountant.
I have checked the Corporations Act but after researching the relevant past legislation could find none. An ACT is a way things are to be enacted and from my understanding, it comes after the bill has been presented to Parliament which is supposed to follow all the protocols it is only when it is passed that it becomes law.
From my understanding. Another issue I have is that the requirements either via phone, mail, or Gov ID require much too much information, and digitally the software to run such programs is supplied by O/S corporations who also have 3rd/4th parties of which we have no control as to what happens to the data we provide.
Do not consent to any terms or conditions. When we set up our companies we all had to provide all the necessary ID which via GST/Payroll, Super, Personal Tax, etc. was and is linked already with ATO. They are requiring everyone to register for fear of hefty fines. If everyone refused to comply, that would stop them in their tracks.
One million Australian directors facing $13k ATO fine
The ATO says the clock is ticking for a million Australians who face a hefty fine, with a key deadline due for the end of the month.
It’s feared almost a million Aussies could face a $13,200 fine from the Australian Taxation Office (ATO) for forgetting – or avoiding – a straightforward act.
Australian business directors have just days to apply for a director ID through the ATO Australian Business Registry Services (ABRS).
The majority of the estimated 2.5 million company directors in Australia needs the unique 15-digit identifier by November 30 to avoid the penalty.
More info on which deadlines apply to whom are available on the ABRS website.
According to the ATO, more than 1.4 million directors have already applied for their director ID, but around one million have not.
Directors can apply on the ABRS website using their myGovID and will immediately be issued a new number.
The unique identifier will make sure companies are being run by real people through the MyGovID system, and it will also allow the system to flag any unusual occurrences, such as a possible phoenix operation.
A phoenixing operation is when a company deliberately goes into liquidation then starts again under a different name, essentially rising from the ashes like a mythical phoenix, to wipe away its debt.
This illegal practice directly costs the economy between $2.85 billion and $5.13 billion annually, according to a report commissioned by the Australian Taxation Office in 2018.
An estimated one-in-10 collapsed businesses are part of an illegal phoenix operation, according to industry experts.
But in the last financial year, although the government received more than 2115 referrals of suspected illegal phoenix activity, according to the ATO, only five matters were successfully referred for prosecution.
Karen Foat from the ABRS encouraged the stragglers to get moving.
“With that November 30 deadline coming up fast, we’re really pleased that so many directors are getting their director ID, and we encourage all other directors to follow suit,” she said.
“Some people might not actually realise they are a director of a company.
“You don’t have to wear a suit or work in an office to be considered a director. If you run a small business, self-managed super fund, a not-for-profit or even a large sporting club, you may be a director, which means you’ll need a director ID.”
Ms Foat detailed some of the myths regarding the Director ID, hoping a clarification would help businesses and individuals avoid getting stung.
“There’s a common myth floating around that if you’ve got a registered tax agent, they can just apply for a director ID on your behalf, but that’s not true.
“All company directors must apply for it themselves, as they are required to verify their identity themselves.
According to Ms Foat, the IDs help regulators create a fairer playing field for “honest businesses”.
“This robust identification process will help prevent the use of false and fraudulent director identities,” she explained.
“Director ID helps the government to take action against illegal activity, for example, a practice called phoenix activity.
“This is really dodgy behaviour, and it’s where business owners illegally shut down their company and transfer assets into a new company to avoid paying what they owe to employees and suppliers.
“By applying for a director ID, you’re helping to protect the community from those doing the wrong thing.”
John Winter, CEO of the Australian Restructuring Insolvency and Turnaround Association (ARITA), previously told news.com.au that the current economic circumstances were ideal for shady phoenix operators.
“The environment right now is the perfect storm for phoenixing, particularly in construction, their margins have been wiped out. Desperate people will do desperate things. The likelihood of phoenixing – we haven’t seen circumstances like this for a long time,” he said.
“This has been around for so long. It happened to my parents in 1974, they lost everything to a dodgy phoenixing builder, the fact that this still happens is a bit of a sad indictment.”
He added that it is “inexcusable” but was hopeful the new rules around director identification would make it harder to get away with.
Michael Carrafa, executive director of insolvency firm SV Partners, estimates that currently one-in-10 company collapses are the result of illegal phoenix operators.
“It might be one-in-10 at the moment, probably in 2018 there was a lot more. It’s probably slowed it down a bit, but it (phoenixing) will come back. Always does,” he also told news.com.au earlier this month.
“We have a huge backlog of zombie companies, insolvent well before the pandemic hit (and) some might have collected government stimulus payments (but) as a result there will be a huge influx of insolvencies.”
Who needs a director ID?
You do if you’re a director of a:
- Charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation
- Registered Australian body, for example, an incorporated association that is registered with the Australian Securities and Investments Commission (ASIC) and trades outside the state or territory in which it is incorporated
- Foreign company registered with ASIC and carrying on business in Australia (regardless of where you live)
- Corporate trustee, for example, of a self-managed super fund.