Episode 53: ASIC and what you need to know!

May 2, 2022

If you have a company or a registered business name then you should be familiar with ASIC otherwise known as the Australian Securities and Investments Commission. In this episode Trudi and Sarah talk about ASIC as a regulator and some of the areas they are responsible for. We also talk about the companies register and the current project to merge more than 30 registers into one to improve reporting and efficiencies. In closing Sarah and Trudi detail the new requirement for Directors to obtain a Director Identification Number. If you have a company, this is a great episode to update your knowledge on the latest info you need to know.

Podcast Transcript Available Here

Duration: 19:58

Sarah Eifermann: Welcome everyone to today's episode of Financial Fofu. We are talking about the fun things today. All things ASIC related. Trudi Cowan: I Know. And for those that don't know what ASIC is. It's the Australian Securities and Investment Commission. Sarah Eifermann: And what do they do? Trudi Cowan: They administer corporation’s law. Sarah Eifermann: So, they're the regulating body for corporations? Trudi Cowan: Yeah. So, for companies that do with business names and a number of things that are company related. They make sure that companies are doing the right things and directors are doing the right things. Sarah Eifermann: Yeah, so everyone loves ASIC. ASIC also regulates other things in terms of people with credit licenses or financial services licenses like financial planner, stockbrokers, things like that, under the investment side of their division, I suppose you'd say. So, we report to ASIC as a finance broker accountants report directly to the ATO. You know the tax practitioners board If you're a tax agent. So, they do have dual purpose, but primarily they are the regulatory body that governs anything corporations related, reporting obligations, et cetera, et cetera. So, you may know them if you've registered a business name or you've set up your own company and have direct dealings with them that way. Yeah, but the reason we wanted to have a chat about them today is because the government currently has this program they're calling it the MBR program or the Modernizing Business Register program and what the plan is, is to bring together more than 30 registers in the one place. Yes, they need to, we know they need to. Trudi Cowan: We know they need to. IF you ever do a business name search, and then going around the site three times until you can actually search the business name. Yeah, that's why, so it's not just the website that some people find a little clunky, but it's also the fact that there's lots of different registers held on lots of different systems in lots of different places. But they can relate to the one particular business so it's difficult to find all the information that you're looking for about that one business. So, the idea of this is to bring it all together in the one place to be administered by the one body to sort of make it easier for, I guess, businesses to actually meet all their various registration obligations and I guess improve the efficiency of some of these registers as well. Sarah Eifermann: So ABR register, Australian business register, which is where your IBN search is that ATO? Trudi Cowan: That's ATO. Sarah Eifermann: Yeah. Trudi Cowan: Yeah. Sarah Eifermann: And so, at the moment that has business names listed on it, but that's being dropped. Trudi Cowan: Yes, and you go ASIC for your ACN and the ATO for your ABN. And they're not always connecting the data between the two very well whereas the ABNS will actually then be pulled into this system. Sarah Eifermann: Which is helpful. Trudi Cowan: Because I can tell you right now when I do applications for clients, I need both ABN and ACN often I have to go and find them, especially when there's a trust, because the ABR register will just say the trustee for XYZ family trust. But then I have to go to ASIC to find the company name which may be ABC proprietary limited to make sure that I've got the right company number that matches the trust ABN. So, this is why they are updating these systems because they just are very clunky and they don't have the capacity, I think, with the growth. So, this way where we're heading to provide what is needed to be provided for the future. Sarah Eifermann: That's right. Trudi Cowan: That's right and you know as we said, there's more than 30 registers they're combining. So, we are looking at things like the asset companies register, the business name registers, the ABN. There would be various licensing registers, such as you mentioned these are all the different registers that they would be looking to combine. Yeah. Sarah Eifermann: Because for example, my trading name, SFA loans is not linked to my credit license. Trudi Cowan: Oh, really? Like it’s easy. Sarah Eifermann: If you go in and search Sarah Eifermann and then *Inaudible - 4:58* Like it's hard for a consumer to do a search if they wanted to. I mean, you would find my details with my credit license attached on my website because I'm required by law. And so, you could take that credit number and go to the ASIC website to the credit register and do a search based on that. But my company technically has a different registration and its complicated and we don’t need to talk about it now, but it depends on who's doing it at what time and what licensing I’m with. And this is another reason why it's so complicated. So yes, I'm assuming then it would also then link to other reporting agencies like AFCA, which is the ombudsman, because I have a separate external dispute resolution registration that is not linked or anything now. Trudi Cowan: So, the idea is to make a single registry for business. So, there's really one place to go to and it's being done in partnership with treasury and ADOISE, Department of Industry Science and Energy. So, there's a few different bodies involved in the project that that have got various bits of information that are being combined. Now, the other thing that's part of this modernization, Director Identification Numbers. Sarah Eifermann: They sort of came out of nowhere and then we're like putting to put force like almost immediately for new entities. Yeah. So, a director identification number is basically for any company directors. You need to get another identification number that proves who you are before you're registered as a company director with ASIC. Confirms your identity. So, it's verification of identity. You get a director’s ID number that ID number then applies that they know that the same person is the director where there's multiple entity types and that they know that ID number has then been verified to a human person. Trudi Cowan: Now I was on a webinar the other day that was talking about Director Identification Numbers, and the guy running the webinar actually said you would be surprised by the number of company directors called Homer Simpson or Fred Flintstone. Sarah Eifermann: No, I wouldn't be, but it's only because when with what I do with work, we obviously look at credit checks and there are instances where people get other Fred Flintstone credit inquiries, or defaults on their credit file and mistaken identity, which is why. Trudi Cowan: That is one of the reasons why this is coming in because at the moment, yes, If I set up a company for you, I would certainly be checking your ID before you did it, but you don't have to go through me. You can set up a company yourself, and there's nothing stopping you from filling in the form with some other name, without anything proving that. Sarah Eifermann: Not every advisor is as diligent as you either. Trudi Cowan: Well, that's also true. So, that's one aspect of it. The other aspect is to track the various companies that an individual is a director of which is to help prevent or track what they call Phoenixing activity? Sarah Eifermann: Yes. Trudi Cowan: Is where a company runs up lots of debts and then they liquidate and closed the company without paying all their creditors and then the same directors start up another company exactly the same and do the same thing again. Sarah Eifermann: Yep. No one likes phoenixes. Trudi Cowan: No one likes phoenixes. It's bad for the economy, it's bad for other businesses. Sarah Eifermann: It’s bad for individual people like people get burned by Phoenix companies or corporations. Trudi Cowan: Yeah. So, this would allow the regulators to therefore track these same directors that’s setting up another company with exactly the same directors, and this is happening a couple of times. Okay. Why these companies being liquidated? Help them identify and give an avenue to investigate businesses doing these types of things, because then now going to be linked by that unique number rather than them going, is that Andrew Smith the same as this Andrew Smith or are they actually different ones? And having to, I guess, go down the path of investigating that a bit further before they can even identify that it actually an issue. Sarah Eifermann: Yeah, exactly. How do we get a director ID, Sarah? Have you done yours? Trudi Cowan: You know, I've done mine. I had lots of things to say about it and there's two parts to getting a director. Right. The first part is getting a myGovID not my gov, myGovID id. This is effectively an authenticator app on your phone. Sarah Eifermann: You may have used it if you did jobkeeper and access the business portal with the ATO. *Inaudible: 9:37* business portal as part of your business, anyway, you may already have it. Basically, you download the app and then you need to upload your identification, which therefore verifies who you are. Yeah. And once you have been through that process, you can then use the micro-ID to log into the director identification number system@abrs.gov.edu which then asks you a few more questions. And it’ll then spit out your director ID number for you. Sarah Eifermann: Yes. Trudi Cowan: Now what's going to happen later in this year is that ASIC is going to go through a process of trying to match those IDs with you as a director and the companies that you're a director for. That won't be a perfect process and they won't get everyone. Right? So then either you as the director, or if you have an ASIC agent or your accountant does some ASIC work for you, you'll need to go through a process of matching your ID against the companies that you’re a director for. So, once you've gotten your director ID number, please let your accountant know whether they're asking or not just send them an email and say, I've done this and here’s the number, so at least they can stick it on their file and if they then have to go through some of these prices later in the year, they already have that information. Sarah Eifermann: Yeah, completely, completely. Trudi Cowan: Couple of important timelines, if you're already an existing company director, you've got until November this year to get your ID. Um, if you are not a company director, but you set up a new company and you want to be a director of that, you now need to have your director identification number before the company. Sarah Eifermann: Yes. You can’t actually set up a new company without it. Trudi Cowan: Yeah. So important to know because companies are quite quick to set up, but this is just an extra bit that has to be done beforehand. So, it may just take a small amount of time longer. Sarah Eifermann: Yes. Trudi Cowan: Yeah. Sarah Eifermann: So, if we're going to talk more about ASIC, because you are an ASIC agent, like that comes as part of your tax registration. Trudi Cowan: No, it's a separate registration, it's a separate one. Technically anyone can be an ASIC agent. You just need to meet, you know, a good person, set characteristics and you need to be managing more than one company. So, if you've got a group of companies, technically you could set up as being your own ASIC agent and just manage your group of companies. Sarah Eifermann: Okay. So, what else do we need to cover when we're talking about ASIC, some things related to ASIC Trudi Cowan: The main important things with ASIC is you have an annual return which is when you pay an annual fee, but it's also a really good time to just check the details that ASIC has on file for you and if they're wrong, make sure that you’re updating those details, names, addresses, whether there's been any changes in directors, shareholding, things like that. ASIC’s got really strict timelines around changing these things usually within 28 days of the change occurring and the fines are all just very automatic. So, they don't have a lot of discretion around the penalties. They are very much just if you are late, here's a penalty, thank you. So, it is important if you are moving or changing any of your details that you do make sure that you're updating ASIC due dates. Sarah Eifermann: Write it in your diary, guys. Trudi Cowan: And I guess another reason for that and one that I've seen a few times recently is that if you move and ASIC sends out your annual return to the wrong address, you don't pay it. Probably not after one year of not paying it, but after six months or even two years of not having paid your annual fee, ASIC just cancel your company. Sarah Eifermann: Yeah. It's becoming more and more regular. There's no discretion. It's not like they text you or ring you and say, FYI, you haven't paid your bill. And if ASIC cancels your company, the ATO will cancel your ABN and you can’t trade Trudi Cowan: You can’t trade. And I've seen it a couple of times lately in various Facebook groups that this has unfortunately happened and look, you can get it resurrected after you pay all the fees, but it's going to take time and what's the impact on your business? Sarah Eifermann: Yeah, as you say, it's trading stops immediately. Trudi Cowan: Yeah. Cause you no longer have a legal entity. You no longer have an ABN. You can't trade without the ABN. So, you might think ASIC It's not important, but it actually really is super important to keep those details up to date. So even if, you know, you need to do it, at least when you check your annual your return, make sure that those details are being checked. But if you know, you're moving, definitely make sure that you get those details updated and it's why that I actually offer the services as an ASIC agent because, well, I received the returns electronically, so it doesn't matter if you've moved, I will still get it and can let you know. Sarah Eifermann: That’s why all mine’s going to treaty. Trudi Cowan: Yeah, so occasionally I'll have people go “why is it worth paying you to do this, I can do it myself.” Well, yes, you can. Sarah Eifermann: You can. Do it then. Trudi Cowan: You can, that's fine but I guess it provides a little bit of security for you that you know, that I'm going to get that letter no matter what, if it gets nicked out of your mailbox, if it gets stolen, if you move and forget to change the address, I'm still going to get that letter and remind you to pay your fee. And I will also remind you to pay the fee because that only gives you about two months’ notice and a lot of people put it off to the last minute. Sarah Eifermann: Can you see when it's been paid? Trudi Cowan: I can see when it's been paid. I can see if it's overdue. I can see when it is due so I can send you regular reminders to say it's due in a week's time. Sarah Eifermann: You better pay it. Trudi Cowan: You need to pay it. So, it might seem like a very small thing, but it's a very important thing to get right. Sarah Eifermann: Yeah, absolutely. Trudi Cowan: Absolutely. Sarah Eifermann: Alrighty. So, you have covered off director's identification, numbers, reporting obligations, registering business names. Trudi Cowan: Registering business names i's also done through ASIC. It's not through a website that I like that much because it's a little confusing. Sarah Eifermann: Yes. Trudi Cowan: Am I being too polite? Sarah Eifermann: You're being very polite. Trudi Cowan: But yeah, it's done through ASIC. It's not an expensive fee to register a business name, you can register a business name, whether you're a company or a sole trader, a trust doesn't matter what type of entity you are. So, if you've got a couple of different businesses or a couple of different brands sitting under the one company, for example, you can have each of those brands listed as a separate business name, which helps protect. Sarah Eifermann: Well, you should have them listed as a separate business name and you can because you shouldn't be trading as a name that you don't actually own the right to trade as. Trudi Cowan: So, it's not trademark protection, but it does stop anybody else from using that as their business name, by having it registered. Sarah Eifermann: They can't legally register it. Trudi Cowan: Yeah, because they can't register the same thing. Sarah Eifermann: And to be fair, like the registration on the Australian Business Registry, it does come into play as evidence in trademark investigator. Trudi Cowan: Yeah, especially if there was a dispute over who was using that name. Sarah Eifermann: So, definitely worthwhile having a look at it. Important to note that if you already have a company using that name, you don't need to separately register it as a business name, having it register as your company name is sufficient and no one would be able to say, for example, my company's TCK Accounts, no one would be able to register a business name as TCK Accounts because I already have it as a company. Trudi Cowan: Because the business register also checks the company register at this point in time. Sarah Eifermann: So, you can't register anything that's too close to another name. Trudi Cowan: Yeah. Yeah, that's right. Trudi Cowan: Look again, something that's fairly straightforward to do yourself. If you can figure out the website, it’s literally choosing the name, paying a fee and making sure you renew it and making sure that you keep your date details up to date so that you're getting the notices to renew. A lot of people I know, tend to renew them for three years. Sarah Eifermann: Same. Trudi Cowan: So even more important to make sure your details are up to date because it's something you can easily forget about because you are only doing it once every three years. Sarah Eifermann: Alrighty. It's not a topic that most of us love talking about or knowing about, but we have to, it's kind of a statutory requirement. So, I think it's important to just note that when you do your asset compliance statement each year, it's a solvency. Yes. That you're making. So, we've talked about this previously. Trudi Cowan: If you are doing your own ASIC, then you still need to do a separate company minute just confirming that your business is solvent and the reason that ASIC requires you to do that is because if you can't sign it, then you shouldn't be trading. Sarah Eifermann: Correct, so we'll leave you with that little thought to think about moving forward, because it's been a theme of ours for this season about making sure that you're trading solvently and all the things that you can do with forward planning and cashflow planning, and goal setting, to be making sure that you're trading solvently because you do sign a legal declaration to the regulatory body every year and every year, it's something to snub your nose at. Trudi Cowan: That’s exactly right and look, and if you have never spoken about your ASIC obligations with, um, your accountant or you've never received any information about a Director Identification Number, now's the time to have that conversation investigating it. Sarah Eifermann: Start investigating it Trudi Cowan: If you're having a text planning session add it on to your list you want to talk about. Sarah Eifermann: Alrighty, wait, we'll see you next week. Thanks everyone. Bye.

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