Changes to requirements to obtain a director ID
With the looming deadline of 30 November 2022 for existing ‘eligible officers’ to obtain a director ID there has been a flurry of activity over the past few weeks culminating in a draft legislative instrument being issued of the Commissioner of Taxation on 15 November 2022.
Previous changes to the Corporations Act 2001 have meant that ‘eligible officers’ must obtain a director ID within a specific timeframe. Under section 1272B of the act, an eligible officer is:
- A director of a company, or of a body corporate that is a registered Australian body or registered foreign company, who:
- is appointed to a position of director; or
- is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to that position; or
- any other officer of a company, or of a body corporate that is a registered Australian body or registered foreign company, who is an officer of a kind prescribed by the regulations…
Section 1272C detailed the requirement for an eligible officer to have a Director ID and when it must be applied for. The following table, outlining the time requirements can be found on the ABRS website:
With the deadline for those who were directors on 31 October 2021 fast approaching, various scenarios where being raised in relation to the requirements to obtain a director ID. For example, a strict interpretation of the legislation suggested that a person who was a director on 31 October 2021 who has since resigned or been removed for all directorships, including those who had passed away, would still be classified as an eligible person and therefore would need to obtain a Director ID.
Thankfully, in October 2022 the ATO confirmed that former directors that have passed away would not be required to obtain a Director ID. Although this news was welcomed, the ATO remained silent on the requirements for other former directors.
Common sense prevails
With the issuing of the draft legislative instrument ABRS 2022/D1, and the accompanying explanatory statement, the ATO are looking to address the matter. It is important to note the legislative instrument is only in draft form and open for a consultation period until 9 December 2022, but is designed to apply retrospectively from 1 December 2022 once finalised.
Under section 1272B(3) of the act, the Registrar (i.e. the ATO) may determine that a class of persons are not eligible officers. The effect of the instrument is to identify the following as not being eligible officers, and therefore remove any requirements for them to obtain a Director ID;
(a) A person who was
(i) An eligible officer…immediately before 4 April 2021; or
(ii) Not an eligible officer immediately before 4 April 2021, but became an eligible officer between 4 April 2021 and 31 October 2021; and
(b) Does not hold any role as an appointed director or alternate director acting in that capacity…after 30 November 2022; and
(c) Does not have a director identification number.
By looking to remove former directors from being eligible officers, the ATO is removing them from being subject to penalties for not apply for a director ID. From a practical point of view, it is also saving these people from the time and sometimes stressful situation of apply for a director ID that is likely to be unnecessary and automatically cancelled in 12 months time due to non-use.
However, should a former director look to be appointed as a director in the future, they will not be able to rely on the exemptions listed above and they will need obtain a director ID before any such appointments.
Please note, these changes do not impact on those who were directors on 31 October and will remain so beyond 30 November 2022. If this is you and you haven’t done so already, you will still need to apply for your director by 30 November 2022. Given the timeframe that has been in place to apply, you should not be relying on extensions to apply being automatically available.
Anthony Cullen, senior SMSF technical specialist, SuperConcepts