As many as 500,000 company directors are yet to sign up to the federal government’s compulsory director ID program, a key element of its efforts to crack down on illegal phoenix activity in Australia.
The director ID is a unique 15-digit identifier that became mandatory for all directors, including small businesses, in mid-December, as part of the government’s troubled modernising business registers program.
It requires that directors verify their identity with the Australian Taxation Office through myGovID.
The life-long ID is aimed at curtailing the $5 billion lost to illegal phoenix activity each year. Phoenixing occurs when a new company is established to continue the business of a company that has been liquidated to avoid paying debts, creditors and employee entitlements.
Despite applications opening in November 2021, around 700,000 company directors were yet to sign up to the scheme at the time of the original November 30, 2022 deadline, leading the Tax Office to extend the deadline by two weeks.
But only around 200,000 directors took advantage of the ATO’s leniency and used the extra time to apply for a director ID, with 500,000 still yet to apply for a director ID either through myGovID, over the phone or using a paper form.
“The director population is estimated to be around 2.5 million. Over 2 million director IDs have now been issued,” an ATO spokesperson told InnovationAus.com
While directors without a director ID risk civil penalties of up to $1.3 million, the ATO has opted to continue its “pragmatic” approach to compliance, where it works with directors to understand their obligations, but its patience is wearing thin.
“The community can expect the ATO will take a reasonable approach to directors who have genuinely tried to meet their director ID obligation but have not been able to due to their circumstances.
“However, the deadline for many directors to apply has now passed, and we take non-compliance with applying for director IDs seriously.
“We are still urging all directors who haven’t already to apply for their director ID as soon as possible. The application process has not changed and directors can apply online at the ABRS website.
“The ATO has now commenced contacting directors who have not met their obligations to apply for a director ID. In the first instance, directors will be provided with guidance on how to apply.”
The director ID is the first new service to be offered by the Australian Business Register Services (ABRS), a one-stop shop introduced as part of the ATO’s modernising business registers program in 2021.
The program, which kicked off in 2017, is consolidating 32 business registers, including the 30-year-old Australian Business Register, onto a single platform built on software provided by New Zealand-based vendor Foster Moore.
Much of the development has been undertaken by Accenture, which has picked up more than $230 million in contracts since its was first brought onboard in 2019 to conduct high-level design work under an initial $3 million contract.
In July, the Albanese government revealed the project would cost another $1 billion to complete after being told by Treasury that the project was “not properly resourced, behind schedule, and over budget”.
The federal government subsequently passed legislation in August 2021 that give the ATO another four years to complete the overhaul and in October provided an additional $166.2 million to the beleaguered project.
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