Illegal phoenix operators jailed, ordered to pay over $4m to ATO

Operating labour hire companies that provided workers to vineyards, fruit and vegetable growers, and meat processers in South Australia and Queensland, Seng Leng Heng, Nathan Sarinn and Nay Chy were found guilty of orchestrating an elaborate illegal phoenix scheme.

While running a series of six companies, the men failed to remit both GST and PAYG withholding to the ATO, despite charging their clients GST and including PAYG withholdings on employee payslips. There was occasional overlap in the companies’ operations, but in general the men would cease operating one business before establishing a new one, and starting the cycle again.

Audits revealed significant tax debts accrued by the companies, but as the men were frequently withdrawing funds from the entities, liquidation proceedings were never able to recover the money owed to the ATO.

Over two years, the men withdrew $23,131,414 in cash from the six entities.

Heng was sentenced to eight years' imprisonment as the “instigator and architect of the scheme,” while Sarin and Chy received four and five years', respectively. They have also been ordered to pay back the full amount owed to the ATO.

ATO assistant commissioner Ian Read said the sentences demonstrated the Tax Office’s intention to take phoenixing activity seriously.

“Phoenixing is an intentional act that requires planning and the alleged behaviour in this case demonstrates a deliberate attempt to defraud the tax and super system,” Mr Read said.

In 2014, the Australian government established the Phoenix Taskforce, which involves 38 federal, state and territory government agencies including the Australian Securities and Investments Commission, the Attorney-General’s Department, the Fair Work Ombudsman and Australian Border Force.

Will Day, chair of the Phoenix Taskforce, characterised illegal phoenix activity as an economy-wide issue that costs the Australian community billions of dollars every year.

“Tax crime is not victimless. Illegal phoenix operators gain an unfair advantage by never intending to meet their financial or tax obligations, not only disadvantaging honest businesses, but the whole Australian community who do the right thing,” Mr Day said.

Since the taskforce was established, the ATO reports it has raised more than $1.54 billion in liabilities from audits and reviews of illegal phoenix activities and returned more than $687 million to the community.