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Trustees take note – changes are on the horizon

In recent years, the rise of illegal phoenix activity has become a primary concern of regulatory bodies. As per ASIC’s definition, illegal phoenix activity occurs when a new company, for little or no value, continues the business of an existing company that has been liquidated or otherwise abandoned to avoid paying outstanding debts. As a result, creditors and employees are often left financially out of pocket, and the greater community suffers due to the Government lacking in owed tax revenue. 
The Australian Business Registry Service’s (ABRS) new solution to combat this: ‘Director IDs’. 
A Director ID is a 15-Digit identification number that a director will apply for once and keep forever. Designed to improve identity security, a director will use it for all current and future appointments to prevent fraudulent behaviour. 
Benefits of the ID system include ensuring that fake people aren’t appointed as directors to companies and that unsuspecting victims won’t be appointed directors without their knowledge or consent. 
What does my SMSF have to do? 
If you are a director, or an alternate director, of a company that acts as the trustee for an SMSF, you will require a Director ID.  
Furthermore, you will also require a Director ID if you are the director of a company that acts as a bare trustee for a limited recourse borrowing arrangement (LRBA). 
How do I apply for a Director ID? 
The easiest way to apply for a Director ID is with the myGovID app. 
If you aren’t set up with a myGovID yet, you can download the associated app from the Apple Store or Google Play. Once the app is open, follow the prompts to set up your account. To apply for a Director ID, you will need a standard strength myGovID, which requires two Australian identity documents.  
With a myGovID setup, you can begin the Director ID application process on the ABRS website. You will need the following documentation to complete the process: 
The application process with all the above resources should take less than 5 minutes. 
On the chance you cannot get a myGovID with a standard strength, directors also have the option to apply over the phone or apply with a paper form. 
How long do I have to apply for a Director ID?
Due to 2.7 million directors requiring a Director ID, the ABRS have provided a range of transitional periods to facilitate the process: 
  • Directors existing before 31 October will have until 30 November 2022 to apply for their ID 
  • New directors first appointed between 1 November 2021 and 4 April 2022 will have 28 days from their appointment to apply for their ID 
  • New directors after 5 April 2022 will need to have a Director ID before their appointment 
Are there any changes to existing company notification requirements? 
No. The director ID requirement does not replace or change existing requirements to keep company records updated. For example, directors must still notify their company of changes in address or other details. The company will still need to notify ASIC of any changes for the public record. 
Is there anything else I should know? 
For those worrying about their digital safety, legislation doesn’t authorise the ABRS to disclose your director ID to the public without your consent, therefore protecting your identity. 
One should also note that civil and criminal prosecution may occur if one fails to apply for their Director ID before the deadline. Directors can be fined up to 60 penalty units and face a maximum of 1-year imprisonment. Further breaches can also occur if a director: 
  • Fails to comply with a direction from the Registrar 
  • Applies for multiple director ID’s 
  • Provides a false ID 
  • Misrepresents their ID 
  • Provides false or misleading information.
For more information on Director ID requirements, click here. 
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