Up to 63% of SMSFs will be impacted by new identification requirements for directors. If your SMSF has a corporate trustee, the director must go through a new registration process. Here’s what you need to know so you can be prepared, including details on the application process.
Update November 2021: Applications for Director IDs are now Open! for more, visit the ATO website.
Why Director Identification Numbers are being Introduced
In March 2021, Treasury released a consultation paper regarding the Modernising Business Registers (MBR) Program which recommended that the Australian Business Register (ABR) and 31 business registers administered by the Australian Securities and Investments Commission (ASIC) be rolled into a single platform.
The MBR Program consequently sees the introduction of a Director Identification Number (DIN) – a single, unique identifier for the individual director of a business or, a corporate trustee. The introduction of a Director ID aims to make it easier to track directors and their corporate history and prevent the creation of fictitious identities.
By centralising this data, the program also aims to:
- Encourage good Corporate Governance,
- Improve data integrity and security,
- Reduce the time and cost for administrators and liquidators,
- Provide one central system for insolvency information, and
- Reduce phoenixing and its financial impact up on the Australian economy.
The new, united platform will be administered by the Commonwealth Registrar as a separate function to the Australian Tax Office (ATO).
How Does the Introduction of Directors ID Impact SMSF Members?
According to the ATO’s SMSF annual statistics from June 2020, almost 63% of all funds have a corporate trustee. This means approximately 690,000 SMSF members will be required to register for their unique corporate ID, including individuals appointed as an alternate director and acting in that capacity, in addition to anyone with a member that has a legal disability.
The implementation of DIN will become an important part of the SMSF landscape as new processes will shape internal procedures for practitioners and create additional considerations for clients and trustee structures.
With the new director ID coming into effect on 12 June 2022, current Australian directors or corporate trustees in an SMSF have one year to apply for their unique DIN before fines of over $1.1 million kick in for non-compliance.
How to Apply for a Director ID
From the 1st of November 2021, directors will need to verify their identity as part of the new Director ID requirement and apply for a DIN via the new Australian Business Registry Services (ABRS) website.
To apply for a DIN, directors need to:
- You will need a myGovID to apply for your director ID online – and if you haven’t already, you can set up your myGovID now.
- Gather relevant documents such as your tax file number, residential address as held by ATO.
- Provide two documents to verify your identity (e.g. bank account details, ATO notice of assessment, super account details, a dividend statement, a Centrelink payment summary, a PAYG payment summary).
Once your identity has been confirmed, you will be issued with a single DIN which be kept permanently – even if you cease being a director, change directorships, or act as a director for multiple organisations.
What is the transition period and when you need to register for a DIN?
A prospective director will be required to apply for their director ID before their first appointment as a director. However, there are transitional rules for existing directors which are dependent on when they were appointed. See the below table for more information.
|Date of Director Establishment||Date DIN Application To Be Made|
|On or before Oct 31, 2021||By 30 Nov, 2022|
|Between Nov 1 2021 – Apr 4 2022||Within 28 days of appointment|
|On or after Apr 5 2022||Prior to director appointment|
What Should I be Doing Now to Prepare for the Introduction of Director IDs?
Although the new system will not become active until 12 June 2022, there are steps that your firm can take and prepare for the incoming changes.
In the meantime, some recommended actions:
- If your firm currently has a bespoke system in place, conduct an audit to ensure they can capture and store the new DIN
- Ensure clients who don’t already have a digital identity have proof of identity documents required to apply for one (eg. driver’s licence, passport, birth certificate, medicare card), and
- start thinking about how your internal processes might need to change (eg. eventually a director ID will need to be obtained before the corporate trustee of an SMSF can be created which means the process of establishing an SMSF may take longer).
While the introduction of DIN means an additional step for the establishment of SMSFs with a corporate trustee, it is important to remember that the new system will help regulators investigate unlawful activity by directors that can harm individuals and the economy as a whole.
Need further assistance?
If you have any questions or require further information, contact your financial advisor or accountant, or Intello on 1300 362 943.