Legislation to combat illegal phoenix activity passes Parliament

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 has now passed both houses of Parliament, extending the director penalty regime to goods and services tax (GST), luxury car tax (LCT) and wine equalisation tax (WET). 

The extension is intended to allow the Commissioner of Taxation to make an estimate of certain unpaid and overdue tax-related liabilities and recover the amount of the estimate where there are reasonable grounds to believe that the taxpayer, or related entities, are involved in phoenix behaviour, or assets are being dissipated with the intention to defeat creditors. 

According to the ATO’s draft Practical Compliance Guideline (PCG 2019/D4), an estimate of an unpaid net amount will generally not be made unless the taxpayer fails to engage with the Tax Office or refuses to co-operate in establishing the overdue and unpaid amount.

“The ability to make an estimate reduces the scope of phoenix operators and other non-compliant entities to escape their obligations,” the ATO said. 

The bill also introduces new criminal offences and civil penalty provisions for company directors that fail to prevent the company from making creditor-defeating dispositions.

Furthermore, it allows the Australian Securities and Investments Commission to make orders to recover, for the benefit of a company’s creditors, company property disposed of or benefits received under a voidable creditor-defeating disposition.