Australian company directors are facing greater scrutiny with the introduction of the Director Identification Number (Director ID) which is part of the Federal Government’s $420 million shake up of business registrations.

More than 2.7 million existing Directors of Australian companies, including foreign office holders, must register for a Director ID before 30 November 2022 and new directors appointed between November 2021 – April 2022 have 28 days after their appointment to get a Director ID.

Director IDs are a unique number much like a Tax File Number for anyone who is currently serving or plans to serve as a Director for a company registered in Australia.

Principally the formation of a Director register is to streamline and cross-reference information provided to ASIC and the ATO, but it is also a measure to weed out ghost and ineligible directors. The introduction of Director IDs will also help prevent companies “phoenixing” – which is the practice of folding a company and creating a new entity with the same board to avoid liabilities.

While registering for a Director ID feels like an additional piece of red tape, in theory it should improve accountability, particularly for foreign Directors who have previously been able to absolve themselves of responsibility when companies go into administration or breach Australian laws.

But the implementation of federal policy isn’t without its teething problems – existing and aspirational Directors will need to identify themselves through MyGov and their personal identification needs to match the details of their directorship.

The process of acquiring a Director ID could be cumbersome for foreign Directors who will need to identify themselves via an agency approved by the Australian Federal Government, such as an Australian embassy and less digitally savvy Directors may experience some technical difficulties navigating the various government websites and processes.

Under the reforms some office holders are exempt and the timeline for Director ID registration varies for existing and newly appointed Directors.

It is critical to get the right advice from a financial and taxation professional to make sure your business is 100 per cent compliant and the new requirements do not impact your business.

Companies may need to review their Directorships and, in some cases, restructure the organisation to ensure business continuity and that is where we can help.