Preparing for Director IDs? Here’s the lowdown for charities and not-for-profits

The imminent introduction of Director IDs – a unique identifier designed to help stamp out illegal phoenixing and other fraudulent activity – will impact two million directors across Australia as they transition to the new system.

Governance Institute has been busy responding to queries from the not-for-profit (NFP) and charity sector about the likely impact of Director IDs on them, providing clarity on timelines and enforcement and clarifying who exactly must comply.

We wrap up the key issues that the NFP sector needs to keep in mind as they prepare for this major overhaul.

The major issues impacting the sector will also be canvassed at our Not-For-Profit Governance Forum on 9 December.

The lowdown on Director IDs for charities and not-for-profits

Many directors of charities and not-for-profits will be required to apply for a Director ID.

Approximately 200,000 new directors are appointed in Australia each year – many of them to the boards of charities and not-for-profits. There are currently almost 60,000 charities on the ACNC register and this number is increasingly steadily.

Governance Institute members who are or are planning to become a director of a board of a charity or not-for-profit are urged to consider their obligations under the Director ID program.

When you need to apply by depends on when you were appointed.

The Australian Taxation Office (ATO) recently launched the new Australian Business Registry Services (ABRS) website, ahead of applications opening in November. For more information visit the ‘who needs to apply and when’ page.

Who needs a Director ID?

If you want to become a director or are already one, you’ll need a Director ID. You can apply for a Director ID from November 2021, including directors of ACNC registered entities.

This includes charities and not-for-profits that are public companies limited by guarantee under the Corporations Act 2001 (Cth) and those that are legal entities under the Corporations Act (Aboriginal and Torres Strait Islander Act 2006 (Cth) (CATSI) entities.

So if you are a director, check the ACNC register to see if your organisation is registered.

What about directors of incorporated associations?

Directors of incorporated associations registered with the ACNC do not need a Director ID.

A very limited exception to this is directors of incorporated associations that have an Australian Registered Body Number (ARBN) in order to operate outside their ‘home’ state or territory. Directors of an incorporated association with an ARBN will need a director ID – even if they are not ACNC registered.

New directors need to act promptly

New directors appointed between 1 November 2021 and 4 April 2022 to a Corporations Act entity (including an entity regulated by the ACNC) will need to apply for their director ID within 28 days of their appointment. This is the most pressing deadline of the new scheme.

For example, if you have never been a director before (in any sector) and you are appointed to the board of a charity on 27 November 2021, and the charity is listed on the ACNC register, then you must apply for a director ID within 28 days following that appointment.

Existing directors appointed on or before 31 October 2021 will have until 30 November 2022 to apply. However, we encourage this cohort to begin their application process from November 2021 if they would like to get a head start.

What do I need to do?

A good starting place is to carefully read the new ABRS website and regularly check for updates.

The application process:

• Step 1 – Get your MyGovID. You are able to and encouraged to start this process ahead of 1 November 2021.
• Step 2 – Complete proof of record ownership via the ABRS website from 1 November 2021. This process involves verifying your identity.
• Step 3 – Fill out the Director ID application form. This simple form will also be available on the ABRS website from 1 November 2021.

Can I apply for an extension?

Yes. The 28-day transitional period for directors appointed between 1 November 2021 and 4 April 2022 may be difficult for some to comply with, especially for charities and not-for-profits with limited resources.

If you can’t apply by the date you need to, you can apply for an extension. Information on how you can do this will be available on the website from November. Governance Institute will update members when further information is released.

Penalties and compliance approach

Failing to register for a Director ID when required to carries significant potential penalties.

However, Governance Institute understands that the focus of the regulators is on education and awareness at this early stage of the rollout.

Several steps are likely to be taken to proactively communicate with and educate individual directors at risk of potential non-compliance before any matter is referred to ASIC for prosecution.

Syncing the registers

Director IDs are the first service offered by the ABRS as part of a wider business modernisation project that will combine more than 30 ASIC registers and the current Australian Business Register on a single system overseen by the ATO.

Governance Institute understands there can be issues with syncing between the ACNC register and the ASIC register. Checking the registers to ensure details are accurate and up-to-date, can save you time in the future. It would be beneficial for syncing to occur with the new consolidated system.

We are engaging with the ATO and ACNC on this topic.

Privacy issues

Currently, no personal details of charity and NFP directors are visible on the ACNC register.

We are aware that some of our members may not wish to have sensitive information publicly available on any new databases due to confidentiality and to prevent fraud and cybercrime.

Legislative instruments dealing with disclosure of sensitive data will be consulted on at a later stage of the project. Governance Institute will provide members’ feedback to Government during this consultation process.