Both the Australian Securities & Investments Commission (“ASIC”) and the Australian Taxation Office (“ATO”) regularly investigate “Phoenix Transactions”.
What is phoenix activity?
Illegal phoenix activity refers to activities that involve the intentional transfer of assets from an indebted company to a new company to avoid paying creditors, tax or employee entitlements. The directors then leave the debts with the old company, often placing the company into administration or liquidation, leaving no assets to pay their creditors.
This type of activity is usually undertaken to avoid financial obligations without risking the operator’s assets and with the intention of resuming business through a new entity.
Why is this type of activity a concern for the ATO?
Recently the ATO announced that phoenix activity is costing businesses close to $2 billion in unpaid debts etc. Furthermore, the ATO indicated that employees of phoenix companies are losing up to $655 million in unpaid wages and entitlements.
What action has the ATO proposed to combat phoenix activity?
The ATO has announced the establishment of a new crime task force that will focus on Phoenix Activity. The task force will provide support in the prosecution of parties that are involved in phoenix transactions and in the recovery of taxes and penalties that result from the prosecution.
A prescribed tax force is one which has the ability to share tax related data between various other agencies which are members of that task force. This task force will include officers from the ATO, ASIC, the Fair Work Ombudsman, Fair Work Building and Construction, Department of Education, the Department of Employment, Department of Immigration and border Protection and NSW and Victorian Offices of State Revenue.
If you require any further information in regards to the above article, please contact The Quinn Group on (02) 9223 9166 or submit an online enquiry.