A new Phoenix Hotline has been established as the Australian Government attempts to combat the activity of dishonest directors and their companies.
Last financial year the Australian Tax Office (ATO) sent out tax bills totalling more than $270 million from more than 340 reviews and audits of businesses involved in “phoenix” activity, the term for a debt-avoidance strategy involving liquidating one company and creating another.
The new Phoenix Hotline offers an easier avenue to report suspected phoenix behaviour directly to the ATO so they can pursue those who are doing the wrong thing.
Minister for Revenue and Financial Services Kelly O’Dwyer
“It will enable timely action to be taken against companies and their directors, safeguarding employee entitlements like wages and superannuation, and ensuring taxes are collected for Government to provide the essential services Australians rely on,” Minister for Revenue and Financial Services Kelly O’Dwyer said.
It comes after the 2018-19 Federal Budget provided an additional $40m over three years to combat illegal phoenix activity (when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts).
Employees, creditors, competing businesses and the general public can provide information or report their concerns about possible phoenix behaviour by calling the Phoenix Hotline on 1800 807 875 or online at ato.gov.au/reportphoenixactivity.
Disclosures will be protected by privacy laws and the Government’s legislative action in protecting whistleblowers.
The government said its crackdown on phoenixing, includes the announced introduction of a director identification number, new phoenix offences, new clawback powers for ASIC, the extension of the director penalty regime, addressing corporate misuse of the Fair Entitlements Guarantee Scheme and the establishment of the Phoenix Taskforce in 2014.
It has also introduced new laws to target the non-payment of superannuation entitlements, reforms that will prevent GST fraud through phoenixing in the precious metals industry and the construction sector, as well as reforms to target black economy activities.
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said a phoenix hotline was a good idea but admitted it will not protect small business.
“At the end of the day, a phoenix hotline will not protect unsecured creditors – small businesses – because they are at the bottom of the list of creditors when a company unscrupulously goes belly-up,” she said.
Ms Carnell said that by the time action can be taken against companies and their directors, any leftover money will go directly to secured creditors, such as the ATO and the banks.
The Fair Entitlements Guarantee will cover wage payments to eligible employees who lose their jobs due to the liquidation or bankruptcy of their employer.
“One way of protecting some small businesses is to enact John Murray’s building and construction industry recommendations; particularly a deemed statutory trust set up for projects over $1 million,” she said.
“Money would be quarantined in a separate legislated account and would not be available for use by the company. It would be used to pay the people who did the work – the subcontractors.”
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