Penalties over Director ID missing in action
Just three months ago, there were warnings that one in five SMSF trustees would be facing huge penalties for not registering for the Government’s director ID but no penalties have been issued as of yet, according to a leading SMSF adviser.
Tim Miller, technical and education manager for Smarter SMSF, said he was aware the ATO was trying to chase up non-compliant individuals but he has not heard of any penalties being applied to those that failed to meet the timeframe to date.
“Whether this is a mechanism of timing is still to be seen but after all the work they did administratively to try and get people to follow through, the industry was expecting to see something,” he said.
The federal government announced in April 2021 that it would be introducing the Director Identification Number system in which all company directors in Australia were required to register for a unique 15-digit identification number which is managed by the ATO as prescribed under the Corporations Act 2001.
In February there was a concerted campaign from the ATO to ensure all company directors were aware of the possibility of penalties of up to $1.3 million if they did not comply.
In the SMSF space, it meant all SMSFs operating under a corporate trustee – the most common structure for the majority of newer funds – were potentially targeted by the regulator, as were any SMSFs that took out a loan to buy property.
It was intimated that trustees who did complete the registration for a DIN would be reported to ASIC and penalties would be applied.
In February, the ATO reported that 20 per cent of all company directors had not applied for a DIN, however of the 700,000 directors of corporate trustee companies for SMSFs, about 600,000 had their director ID, and only 14 per cent at that time were yet to apply.
Mr Miller said there were a lot of trustees that were not aware of their obligations relating to applying for a DIN.
“Like much of the administrative work to do with an SMSF many trustees thought the DIN would be taken care of by someone else,” he said.
“I know a lot of administrators were on the phone helping trustees go through the process step by step. It was all a bit more complex because it was all linked to MyGov IDs and ASIC.
“I believe that a lot of trustees were aware of the requirement but did not appreciate what it meant.”
The ATO said the number of SMSF directors obtaining a director ID continues to grow, with around 90 per cent now having obtained one.
"While the deadline for directors to apply for a director ID has now passed, directors can still apply for their director ID. ABRS is taking a reasonable approach to those directors who are trying to do the right thing, focussing predominantly on help and support activities. This includes issuing letters/emails and making calls to directors advising them of the requirement and providing guidance about how to apply," it said.
"It is important that those who are new to having an SMSF and are a corporate trustee understand the requirement to obtain a director ID. Agents and advisers can help their clients by providing guidance on the requirement. For further information on those who do and don’t need a director ID see: Who needs to apply and when | Australian Business Registry Services (ABRS)."
