How To Set Up Your Director ID

In order to reduce fraud, the concept of a director ID is a unique identifier that a director will apply for once and keep forever - but how do you set one up?

For those unfamiliar, the introduction of the Director Identification Number (DIN) is part of the Government’s Modernisation of Business Registers (MBR) Program. Designed to create greater transparency and prevent the potential for fraud and phoenix company activity, the MBR program will unify the Australian Business Register and 31 ASIC business registers, including the register of companies. In effect, the new system will create one source of truth across Government agencies for individuals and entities from November 1 2021, and will be managed by the Australian Taxation Office (ATO).

While many will no doubt be concerned about potential privacy issues, the director ID will not be searchable by the public and will not be disclosed without the consent of the director. In essence, the new system will provide traceability of a director's profile and association with companies over their career, but it’s worth doing your research as to whether you will actually need one or not. 

The New Director ID System Explained

Directors, or alternate directors acting in that capacity, will need to apply for a director ID if they are a director of either:

• A company, which will have an Australian company number (ACN);

• An Aboriginal and Torres Strait Islander corporation;

• A corporate trustee, for example, of a self-managed super fund;

• A charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation;

• Registered Australian body, which will have an Australian Registered Body Number (ABRN). 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; or

• A foreign company registered with ASIC and carrying on business in Australia (regardless of where that individual lives)

In contrast, a director ID is not required if you are a:

• Director of an incorporated association (with no ABRN) registered with the Australian Charities and not-for-profits Commission (ACNC)

• A company secretary but not a director

• Acting as an external administrator of a company

• Run your business as a sole trader or partnership

All existing directors will have until 30 November 2022 to apply for a director ID. When a director must apply for their Director ID depends on the date that individual becomes a director and whether they are a Corporations Act or CATSI Act director, as outlined below. 

If the company intends to appoint new directors, it will be important to ensure that they are aware of the requirements and timeframes to establish their director ID if they do not already have one. 

Applying For Your Director ID 

To apply for a director ID as an Australian resident director, you will need to complete a number of steps and have a number of identification documents available ready to submit.

The first step involved in the process of applying for a director ID is to verify your identification. If you establish your director ID online, and you have not already set up myGovID, you will need to download the app onto your phone or device and create an account. It’s important to note that myGovID account does not automatically create your director ID -  the app’s only purpose is to validate your identity, and once validated, issue a code that can be used to identify you on government online services without going through the same verification process.

Your myGovID uses your phone or device’s camera to scan your forms of ID, such as your passport or drivers licence (check the documentation requirements here). In a nutshell, the process is to validate who you say you are, so be careful when you are scanning your documentation as the system does not always read the scan correctly.

The next step is to apply for your director ID through the Australian Business Registry Services website. Use the email you used to create your myGovID to start the process, and you will need to have on hand documentation that matches the information held by the ATO. If you have a myGov account linked to the ATO, you can find the details on your profile. Applicants will need the following information on hand. 

• Your tax file number

• The residential address held on file by the ATO; and

• Two documents that verify your identify, such as:

  • Your bank account details that are held by the ATO. On your myGov ATO account, see My Profile > Financial Institution Details. 

  • Dividend statement investment reference number

  • Notice of assessment (NOA) - date of issue and the reference number. On your myGov ATO account, see Tax > Lodgements > Income Tax > History. 

  • The gross amount from your PAYG payment summary

  • Superannuation details including your super fund’s ABN and your member account number

The final stage of the application process will request your personal contact details, not the company’s. Once complete, your director ID will be issued immediately on screen. This information should be provided to your company secretary or office holder.

If any of your details change, such as a change of residential address or phone number, you will need to update your details through the ABR. You will also need to notify your company within seven days, or fourteen days for CATSI Act directors, and the company will then need to notify the Australian Securities and Investments Commission (ASIC) within twenty eight days. 

While foreign directors of Australian companies have the same requirements and deadlines as Australian resident directors, the verification process is only accessible in paper form. If you are applying using the paper form, your identification documents will need to be certified by an authorised certifier such as a barrister, or justice of the peace. 

It's important that anyone agreeing to be a director understands the implications. Being a director is not just a title - it is a responsibility. At a financial level, directors are responsible for ensuring that the company does not trade while insolvent. The by-product of this is that the directors may be held personally liable for the debt incurred. The director penalty regime has also tightened up in recent years to ensure that directors are personally liable for things like PAYG withholding, net GST, and superannuation guarantee charge liabilities if the company fails to meet its obligations by the due date. For many small businesses, the directors are also often personally responsible for company loans secured against property such as the family home. It’s not a responsibility that should be taken lightly, as failing to perform your duties as a director is a criminal offence with fines of up to $200,000 and up to five years in prison.

Whether you’re starting a business, purchasing an existing one, or even reevaluating where your current enterprise stands - you will require some form of financial know-how if you hope to successfully navigate your legal tax requirements as well as hitting your financial and business goals. However, if understanding the legalities that surround your business or finances isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant in order to free up their time while knowing that their financial obligations are already taken care of by the professionals. 

Ultimately, the team at Muro believe that every business owner is an entrepreneur. However, accounting does not discriminate - finances break down barriers and are not territorial. If you would like to take a deeper look into your finances, please get in touch with us at Muro today to ensure that you’re on the right path for success.