Company directors will be forced to sign up for permanent unique identification numbers which will track them past individual businesses for their entire lives under laws being considered by the Federal Parliament this week.
The director identification laws, which have bipartisan support, are likely to become a reality for small-business owners across the country in the coming months, along with an accompanying signup fee.
The reforms, recommended by the Black Economy Taskforce, are aimed at curbing illegal phoenixing activity, estimated to cost the economy between $2.9-5.1 billion annually.
The Commonwealth Registers Bill 2019 also sets out a framework for broader reform of Australia’s business registry regime, setting the stage for the creation of a new database that merges ASIC’s company’s register and the ATO’s Australian Business Register.
Under the new law, existing directors will be required to obtain a unique ID number which they will keep permanently, even if they cease to be a company director.
There will be civil and criminal penalties for directors who fail to apply for an identification number within a timeframe which will be set out by the relevant minister once the law passes.
Proponents of the changes argue they will improve the integrity of compliance activity, but the prospect of a permanent identification number is a cause for concern, accountant Lisa Greig says.
“They’re just making it too complex,” Greig, owner of Perigee Advisers, tells SmartCompany.
“It’s another thing where they’re trying to combat the 1% of the population doing the wrong thing by making the other 99% jump through another hoop.”
Greig says while the modernisation of Australian business registers is a positive, the identification numbers and new databasing plans raise cyber security concerns.
“The security has to be there, I’d be concerned if it [director ID] could be used and abused,” she says.
Using Tax File Numbers (TFNS) instead of director ID could be a way to improve integrity without implementing a new compliance measure, Greig argues.
Council of Small Businesses of Australia (COSBOA) chief executive Peter Strong is supportive of the changes but says privacy concerns come down to how the new scheme is managed.
“If you become a director now there’s information out there, someone could even be made a director of something and not even know,” he tells SmartCompany.
“This gives the system much more integrity.”
Strong says a $20-40 dollar fee for signing up is nominal, but he would be concerned if regulators increased the price to $200 in the years after the new system is implemented.
“We want one place that manages registers … a one-stop shop, you go there, it tells you what registers you are on and why,” Strong says.
Assistant Treasurer Stuart Robert, who introduced the new laws to Parliament last week, says the current system creates inefficient cost burdens because data is hosted in so many different systems.
“The legislation allows the appointment of a Registrar (or Registrars), who will have the ongoing flexibility to adapt and respond to changes in technology to improve the user experience and simplify the way people interact with government business registers,” he said in a statement.
“This will implement a ‘tell us once’ for business interactions with the registry, reducing the frustration expressed by businesses in repeating themselves, reducing the time required to address their requirements by staff and enable more consistent services.”
Tony Greco, general manager of technical policy at the Institute of Public Accountants, said stricter ID laws reflect the fact Australia is “starting from a low base” on integrity around directorships.
“The bar is pretty low when it comes to ensuring people on the public register are holding important office-bearer obligations and are aware of that,” he tells SmartCompany.
“This introduces a tightening of the rules.”
However, Greco concedes that while the ID numbers will help crack down on phoenixing activity, they’re unlikely to stop the practice in its tracks.
“Those who want to avoid the system will think of better ways, but it’s going to be harder,” Greco says.
What do you think about the new director ID laws? Let us know [email protected]
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