Worst offenders could face criminal charges, expert warns, as final Director ID deadline looms

Thousands of company directors technically committed a criminal offence by not applying for a Director ID number before November 30, but regulators appear unlikely to chase business leaders through the courts the moment a 14-day amnesty period comes to an end.

After a year-long application window, the deadline to acquire a Director ID number from Australian Business Registry Services (ABRS) passed at the end of the month, exposing latecomers to both civil and criminal punishment.

Under the Corporations Act 2001, individuals who fail to apply for a Director ID when directed by the Registrar face a maximum criminal penalty of $13,200, with civil penalties extending all the way to $1.1 million.

But with some 700,000 company directors within Australia yet to secure a Director ID number as of November 30, the ABRS declared it would not enforce compliance measures against directors who apply before December 14, 2022.

“Whilst penalties or offences can apply, the community can expect ABRS to take a reasonable approach to support people to apply,” said commissioner of taxation and registrar Chris Jordan.

Given the ABRS’ promise of a “reasonable” approach to compliance, and the high likelihood that thousands of directors will miss the deadline, Oliver Jankowsky, partner and head of international practice at Hall & Wilcox, says it is unlikely regulators would immediately penalise business leaders.

“I think there will be a progressive increase of pressure,” Jankowsky told SmartCompany.

Australian regulators may be more inclined to pursue criminal penalties over missing Director IDs when company directors are also accused of more significant breaches like insolvent trading, Jankowsky added.

If a director is “being pursued by the regulator for the breach of the director’s duties, and then it’s discovered they also didn’t have a [Director ID number], they’ll also then be prosecuted for that,” he said.

“Criminal offences would be reserved, presumably, for the worst offenders.”

Other avenues may exist for the ATO and ABRS to penalise directors who fail to submit their applications by December 14.

Director ID applications are currently free, but regulators could impose a fee for applicants past the amnesty period, Jankowsky speculated.

Business leaders criticise lack of mail-out

The 14-day amnesty period was welcomed by company directors yet to sign up, but some concerns remain.

Business leaders say recent attempts to sign up have been hampered by difficulties navigating the separate myGovID system, which is required to sign up for a Director ID.

Others claim their calls to the ABRS and Australian Taxation Office (ATO) for assistance have been delayed by extensive waiting times.

Director IDs are also essential for Australian directors based overseas, meaning internationally-based business leader must certify their identification documents with local authorities — and put their faith in global mail carriers to deliver their paperwork to Australia by December 14.

Those troubles may have been avoided if directors filed their applications earlier in the year.

However, some company directors have criticised the ATO and ABRS for not informing business leaders of their obligations by mail in the first place, a decision they say left them in the dark about their Director ID obligations until the last minute.

The ATO has defended its decision not to post Director ID alerts.

“A bulk mailout would have been a very costly and inefficient mechanism to use in the first instance,” an ATO representative wrote on the tax office’s public forum last month.

Instead, awareness of the Director ID scheme has largely come via regulator announcements online, media reports, and advice from business advisors and accountants.

While noting the lack of a traditional mail-out, Jankowksy says the Director ID roll-out shows directors — including “mum and dad” directors acting as corporate trustees — should pay close attention to their obligations.