In its annual Benchmark Report released this week, software provider Class said the process involved in obtained in obtaining a director identification number (Director ID) “has been likened to a ’silent compliance bomb’ and the pressing deadlines to get one will be a struggle for both professionals and their clients”.
“Even with the best intentions around SMSF compliance, it will be a struggle for the industry to meet the deadline,” the report stated.
The director ID framework was introduced from 1 November 2021 and will impact around 700,000 individuals.
Individuals that became a director before 31 October 2021 have until 30 November this year to obtain a director ID.
Anyone that was appointed a director after 5 April this year was required to apply for a director ID before their appointment.
Class noted in the report that a June 2022, Director ID applications processed surpassed 600,000.
“It is estimated by the government that the industry needs to onboard some 2.7 million directors to this regulatory regime by the end of November 2022. With less than 20 per cent of the directors’ population having Director IDs, we face significant headwinds to comply — whether a corporate SMSF trustee or a director of any company,” the report warned.
“The sooner the government allows professionals such as accountants, financial advisers, tax agents, or ASIC agents to assist directors and corporate trustees to meet the compliance deadline, the sooner the industry can alleviate this compliance issue.”
Commenting within the report, Smarter SMSF chief executive Aaron Dunn said with such a large cohort of corporate trustees within the SMSF industry, including the majority of new establishments using a corporate trustee, the Director ID requirements impose an additional layer of obligations that professionals must be across with their SMSF clients.
“Building new processes into the fund establishment process are important here because you need to understand whether the individual has a Director ID already, whether they are within the transitional period to obtain one (by 30 November 2022) or need to get one prior to their appointment as director,” explained Mr Dunn.
“This is likely to add time onto existing processes, and failure to adhere to the Director ID regulations will lead to penalties ($13,200).”
Mr Dunn said that education will play a critical role in the successful rollout of the director ID requirements.
“Many who need one tend to be older and likely less ‘tech savvy’ — albeit they may have been exposed to technology throughout the last few years during COVID. The role of the practitioner in obtaining this Director ID is limited due to identity obligations in setting up a strong myGovID profile to establish one,” he said.
“Providing in-depth instructions of the various stages — what is required, what roadblocks you might confront and how professionals can help (to an extent) — is all part of a communications rollout.”
Where clients are struggling with obtaining a Director ID digitally, Mr Dunn noted that there is scope to complete the application using a paper form.
“This is a much lengthier process and should be started well in advance of the transition due date for registrations,” he said.
“Assistance could be provided by a professional (i.e. tax agent, ASIC agent, etc) to work through the paperwork.”
It is important to actively monitor the success of your clients who need Director IDs, Mr Dunn stressed.
“This process should also include regular follow-ups with those who haven’t obtained (or provided you) with their Director ID to ensure that they have met the relevant deadlines in order to avoid any penalties for non-compliance,” he said.
No one has yet explained why a registered tax agent cannot simply advise the ATO that their client requires a DIN and the client whom the ATO knows, including the state of the tax lodgements and debt payments, either arranges for a DIN to be issued, or advises why not.
You know, tax agents, a regulated group of individuals who are personally accountable for their tax actions on a daily basis and the ATO knows.
Here’s a hint as to why they didn’t use TFN’s – the first three digits in the Director Identification Number are a country identifier (which is the reason they all start with 036).
You could be right Andrew, that and the stupid privacy rules around TFN’s means you can’t be obligated to disclose it. So one stupid rule begets another stupid rule. Never seen that before from government.
The paper app is only for overseas clients. Best route for non tech abled individuals is to ring the ATO and get it done on the phone. Providing they have their ID at hand, it isn’t an onerous task – less onerous than the MyGovID requirements.
I just hope, when the new business register is fully operational, the ID is populated automatically and individuals aren’t required to do something else. The info provided on the “next steps” is very limited.
This is not correct Kym, We have successfully used it for many of our clients, esp the older ones.
The individual trustee option is starting to look a lot more appealing.
Director ID red tape when combined with the continual indexing of ASIC fees (both company registration and annual review fees) makes company trustees less attractive – especially where only simple listed investments are to be held (no property etc).
Professionals should be pragmatic with the trustee structure rather than being too precious about it.
You’ll be happy with the director ID red tape once you have a trustee pass away or become incapacitated.
I deal with both of these matters on a regular basis.
It comes down to the client’s individual circumstances. In situations where the SMSF will not continue with the death/incapacity of one member (often the case) provided the other trustee is either executor of the estate or EPoA holder, it’s no more onerous than if there was a trustee company involved.
Key aspect is having the conversation and plan in place before sh1t hits the fan.
Why did they just not use TFN’s of Company Directors to track Phenix rorts ?
Oh that’s right the Canberra bubble bureaucrats love creating more BS Red Tape at every turn to justify their own wasteful existence.
Clean out the BS bureaucrats. Start again.
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