Last month, the Commonwealth Government introduced legislation that would impose significant penalties of up to 10 years jail on company directors who are found to have engaged in illegal phoenix activities.
If passed, the legislation will require all Australian company directors to have a unique identification number which would allow regulators to detect and track rogue company directors to ensure they cannot engage in multiple instances of phoenixing.
Defined by the Australian Taxation Office (ATO) as “when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements”, phoenix activity has an estimated direct economic cost of between A$2.85 billion and A$5.13 billion.
According to the ATO, illegal phoenix activity is particularly rife in the building and construction, as well as labour hire, payroll services, and security industries.
Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has welcomed the legislation, calling it “a definite step in the right direction, so that small businesses get a fair go”.