Phoenix Taskforce cracking down on dodgy business behaviour

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Illegal phoenix activity is where a business liquidates assets deliberately to avoid paying creditors and other obligations and then restarts trading as a similar entity.

Six search warrants were executed yesterday as part of a cross-agency investigation into alleged illegal ‘phoenix’ activity on the Gold Coast. The operation stems from the work of the members of the multi-agency Phoenix Taskforce who are collaborating to help stamp out illegal phoenix activity.

The search warrants, which were led by the ATO with Australian Federal Police assistance, were part of a criminal investigation into unpaid superannuation, employee withholding, GST, and income tax.

“This firm response forms part of our ongoing joint agency investigations into illegal phoenix activity, where a company deliberately liquidates to avoid paying creditors, taxes and employee entitlements. The perpetrators transfer the assets to a new entity, and continue operating the same or a similar business with the same ownership,” ATO Deputy Commissioner Michael Cranston said.

Phoenix activity costs the Australian economy around $3.2 billion each year. Honest businesses and individuals suffer the most because debts to suppliers are left unpaid, employees are robbed of their superannuation entitlements, and the community is denied revenue to fund essential services. A phoenix company is often able to undercut other contractors when bidding for jobs, leaving its competitors out of work, whilst the controllers of the phoenix company continue to rip off its employees and suppliers.

“There are a number of signs that a business you are working for may be involved in phoenix behaviour,” Mr Cranston said.

“Employees may be pressured to take leave or have their employment status changed from permanent to casual. They may also notice that there are frequent changes in the identity of the company that is paying their wages, or that their superannuation entitlements are not paid.

“If you suspect a company you are dealing with is exhibiting any of these signs, get in touch with the ATO.”

David Koch and Deputy Commissioner Michael Cranston answer a question from the public about a potential phoenix company.

We spoke with a small business owner who was impacted by phoenix activity, and discussed some of the signs and ways to stay protected.

Phoenix activity has impacts on the business community, employees and contractors, the government and the environment. For more information, visit https://ato.gov.au/phoenix.

Report suspected phoenix activity by phone on 1800 060 062, by email at phoenix@ato.gov.auor online at https://www.ato.gov.au/Forms/Tax-evasion-reporting-form/

Chloe Potvin
Chloe Potvin is a contributing small business writer for Kochie's Business Builders.