The federal government has announced it will stop its Modernising Business Registers (MBR) program following independent review findings that the program could not deliver value for money, with massive budget and timeline blowouts: see Review of the Modernising Business Registers Program – Final report | Treasury.gov.au
The independent review Report found the MBR program was off course and could now cost up to $2.8 billion, more than five times the original $480.5 million estimate given by the government.
The Report found the expected economic benefits of the program do not justify the revised costs. It also found that the program would not be able to be delivered in full until 2029 – a delay of five years.
While the Report considered options to turn the program around, it ultimately concluded that the program should stop.
Key drivers for the program’s cost blowout included a significant underestimation of complexity when the program was conceived; significantly greater than planned use of contractors, leading to increases in labour costs; government decisions to expand the scope of the program before it was delivered; issues emerging due to the government’s decision to transfer responsibilities from ASIC to the ATO; and direct consequences resulting from the COVID‑19 pandemic.
What is proposed – back to ASIC
The recommendation is to move the registry functions back to a new division within ASIC. That will cost $105 million to improve data integrity and quality, and about $410 million to stabilise existing register technology. Business as usual registry operations will therefore continue under ASIC.
While the Director ID, which enables directors to have one identifying number across all of their companies, is said to be unaffected, the Report notes that there needs to be confirmation of the “policy position on whether Director ID numbers should be made publicly available”, which is necessary, in the writer’s view, if the original purposes of the Director ID are to be met. As the Report explains, Director ID will help with the integrity of data in the proposed new ASIC Companies Register by filtering out fictitious characters over time and will allow regulators to better understand the various business roles and relationships that exist between individuals and different entities.
The Report says that this also assumes Director ID numbers and company information in the proposed Companies Register will be linked so that the full range of benefits flowing from the introduction of the Director ID regime can be enabled. This option also assumes that ASIC will introduce authentication requirements for the people and businesses that transact with ASIC.
2.3 million Director IDs issued
The Report explains that the business community has been aware of the MBR Program for many years, with 2.3 million Director IDs issued as of 30 June 2023. Consequently, expectations for the MBR Program are very high. Continued delays and negative media reports are likely to undermine the extent to which the MBR Program can build trust and confidence in the government’s digital agenda.
“However, directors do not get any value from Director IDs at present, and many rightly ask why they were forced to obtain a Director ID if it is not supported by any of the registers. If Director IDs continue to lack a concrete purpose, then it is likely that the extent to which the program can build trust and confidence in the government’s digital agenda will be undermined”.
These reforms would lead to “improved Phoenix compliance outcomes” and produce the largest quantified financial benefit of the MBR Program.
In fact, the financial benefits under the measure are perhaps, the Report says, understated. Other benefits that are “expected to be unlocked by the Phoenix Taskforce” include:
- Other related, but as-yet unquantified compliance benefits that will flow from using ASIC and ATO data with Director IDs and register data.
- Broader economic benefits due to enhanced transparency and trust in the economy.
- Benefits associated with combating unscrupulous labour high operators who use complex corporate structures and straw directors to avoid paying PAYG withholdings, GST, and superannuation (as recommended by the Migrant Workers’ Taskforce). Migrant Workers’ Taskforce – Department of Employment and Workplace Relations, Australian Government (dewr.gov.au)
- Benefits associated with combating other types of tax mischief, including GST fraud.
The director ID and attempts to respond to unlawful phoenixing are the subject of general law reform comment in the 2023 PJC Report on Corporate Insolvency. Thoughts on the PJC’s Corporate Insolvency Report – Murrays Legal
With corporate data returning to ASIC, it should be noted that the PJC Report also recommended that ASIC  “collect high quality, granular data in relation to insolvency and provide this data in a timely way to relevant government agencies and regulators”; and data in relation to deregistered companies.
Unlawful phoenix activity continues
While ever the full public access and use of the director ID is delayed, along with other transparency reforms including a beneficial ownership register, improved anti-money laundering laws, free public access to ASIC/ABR databases and full application of single touch payroll, phoenix activity will continue. Sunlight on pre-insolvency advisers – Murrays Legal