Are you a director of a company or about to become one? A scheme introduced in 2021 requires you to obtain a Director Identification Number (ID).
The Government has introduced this new ID requirement as part of a package of reforms to address illegal activity. The initiative is delivered by the Australian Business Registry Services (ABRS), which is a newly established function of the ATO.
In the opening month of the scheme, more than 70,000 director IDs were issued and the overwhelming majority of these were issued digitally.
What is a Director ID?
A director ID is a unique identifier that a director applies for once and they keep the same ID forever. The introduction of these IDs is aimed at preventing the use of false or fraudulent director identities. As well as help regulators to trace directors’ relationships with companies over time and better identify director involvement in unlawful activity.
Once an ID has been issued, it should be passed on to the record holder in the relevant company or corporation. Depending on the organisational structure this could be a company secretary, another director, a contact person or an authorised agent of the company.
There isn’t a requirement to provide your director ID to ASIC.
Who needs a Director ID?
As detailed on the ABRS website, you need a director ID if you’re an eligible officer of:
- a company, a registered Australian body or a registered foreign company under the Corporations Act 2001 (Corporations Act)
- an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (CATSI Act).
An eligible officer is a person who is appointed as:
- a director
- an alternate director who is acting in that capacity.
You can also apply for a director ID if you intend to become a director within the next 12 months. If you fail to become a director within that time frame, you will not retain the ID.
You’ll only ever need one director ID, and don’t need to apply for another one if you become a director of other companies or corporations.
When are director IDs needed?
Shareholders, employees, creditors, consumers, external administrators and regulators are entitled to know the names and certain details of the directors of a company. Because directors have to verify their identity as part of the application process to receive their ID this helps to:
- reduce the likelihood that a director can appear as a different person on different company records
- make it easier for external administrators and regulators to trace directors’ relationships with companies over time
- identify and eliminate director involvement in unlawful activity, such as illegal phoenix activity. Which is when a company is liquidated to avoid paying its debts. Then a new company is started that has the same business activities but now without the debt.
With director IDs now in play, regulators and advisors can obtain a complete picture of a director’s corporate history, bring to light any conflicts of interest and give a clearer view of whether companies have participated in related party transactions.
How does a director ID work?
A director ID is a 15-digit identifier issued to a director, who has verified their identity with us. This director ID will start with 036, which is the 3-digit country code for Australia under International Standard ISO 3166, and ends with an 11-digit number and one ‘check’ digit for error detection.
If you are a director you will only ever have one director ID issued to you. Even if you change companies, stop being a director, change your name or move interstate or overseas, your director ID stays with you forever and doesn’t change.
- Your director ID will only be disclosed to:
- someone you give us permission to disclose it to
- certain Commonwealth, state and territory government bodies
- courts and tribunals.
So a director ID won’t be available to the public without the director’s consent, and for now at least, IDs are not searchable by the public. The Registrar is looking to consult the community about what details can be disclosed and searched in the future.
How do directors apply for the ID?
You can apply for your director ID using the ABRS website and there are three key steps in the process which are detailed extensively on the website.
Step 1 is to set up myGovID. To do so you will need to download an app to your smart device so you can verify who you are and then log in to access a range of government online services.. It’s important to note that your myGovID is not the same as your myGov account which is linked to things such as the ATO, Medicare and Centrelink.
Step 2 is to gather up your documents that are needed to verify who you are. You’ll need to have on hand your tax file number, residential address and two documents to verify your identity.
The final step once you’ve been verified is to login and apply for your director ID.
The process is free and should only take a few minutes.
Can someone else apply on your behalf?
No. The director themselves must apply for their own Director ID so that they can complete the proof of identity requirements. However, authorised tax and ASIC agents can assist their clients to understand the new requirement and provide support around how and when to apply.
For more information about director IDs head to the https://www.abrs.gov.au/director-identification-number
Being a company director is a privilege and can be a rewarding part of your career. Are you looking to upskill in governance to become a more effective company director and enhance your skills as a board or committee member of companies, government, or not-for-profit groups?
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