ATO provides relief for resigned SMSF directors
Directors who have resigned prior to 1 December will no longer be required to obtain an ID under prospective tweaks to the rules issued by the ATO yesterday.
ABRS 2022/D1 sets out changes to the “eligible officer” rules that previously required anyone who was a director immediately prior to 4 April 2021 (when the rule applied), or who became a director between then and 31 October 2021, to obtain an ID number by the end of this month.
Anyone becoming a director after 31 October 2021 was obliged to get an ID number first, so the November 30 deadline does not apply.
The draft legislation now excludes anyone who was a director prior to 31 October 2021 but who resigned on or before the 30 November deadline.
The changes appear to respond to critics of the director ID number scheme who said it cast its net too wide.
These included directors who would have been required to comply despite no longer acting in the role of a company officer, nor holding any intention to do in future.
The explanatory statement accompanying the draft says:
“The classes of persons who are determined not to be eligible officers are:
a) under the Corporations Act:
Persons who were eligible officers immediately before 4 April 2021, but never hold a role of 'director, or alternate director when acting in that capacity' (director) after 30 November 2022
Persons who were not eligible officers immediately before 4 April 2021, but became eligible officers between 4 April 2021 and 31 October 2021, and never hold a role of director after 30 November 2022;
Persons who are not natural persons;
b) Under the Corporations Act, for the period 4 April 2021 to 30 November 2022:
Persons who were eligible officers immediately before 4 April 2021, but ceased to hold a role of director prior to 1 December 2022
Persons who were not eligible officers immediately before 4 April 2021, but became eligible officers between 4 April 2021 and 31 October 2021, and ceased to hold a role of director prior to 1 December 2022.”
Smarter SMSF chief executive Aaron Dunn explained that the changes will provide relief to directors who are ceasing their role by 30 November 2022.
"For example, let's say we have a director of an SMSF with a corporate trustee and that is the only time in which they've held any directorship positions and they are not intending on holding that directorship beyond the windup of the fund on 30 June 2022," Mr Dunn explained.
"This legislative instrument means they will no longer need to get that director ID."
Mr Dunn noted there will be a number of clients who have already gone through the process to obtain a director ID who may now be frustrated now that it's not required.
"The reality is though, that it's better late than never," he stated.
CPA Australia’s senior manager of tax policy Elinor Kasapidis welcomed the ATO response to had responded to
“CPA Australia has raised concerns about the director ID requirements being imposed on resigned directors. We are glad that the Commissioner has responded and reached a practical solution for this particular circumstance,” she said.
“As with all new programs, this type of responsive approach to director ID and Modernising Business Registers is important to minimise unnecessary disruption, streamline processes and find practical outcomes.”
A number of groups in the SMSF industry had previously flagged their frustration with the fact resigned directors would need to apply.
In an article last week, Accurium head of education Mark Ellem noted that while an individual can apply for a director ID up to 12 months prior to their actual appointment, if the individual has not been appointed as a director within 12 months the non-active director ID will lapse.
“After their director ID has lapsed, they need to re-apply prior to the actual appointment. They will be issued with the same director ID, effectively the lapsed director ID will be re-activated, but they need to go through the application process,” he explained.
He gave an example of an individual who was first appointed as a director in February 2015 and resigned in April 2022. The individual holds no other directorships and is still alive.
Before the release of the ATO's legislative instrument, they would have had to apply for a director ID by 30 November 2022 as they were an eligible person (a director) on 4 April 2021, said Mr Ellem.
Given the director ID will lapse if after 12 months they have not been appointed as a director, Mr Ellem said it seemed a “counterproductive exercise” for individuals in situations such as this to be required to apply when it will only lapse a year later.