Phoenix activity sting marked by public examination

The ATO said the examination into a group of entities connected to Philip Whiteman will look at the suspected promotion and facilitation of phoenix activities and tax schemes.

More than 45 service providers, clients and employees of these advisors, and alleged ‘dummy director’ of phoenix companies, will be examined, said ATO deputy commissioner Will Day.

“While we can’t comment on the details of specific matters before the courts, this is a timely reminder of the human impact of illegal phoenix activity,” Mr Day said.

“Illegal phoenix activity deprives employees of their hard-earned wages and superannuation entitlements, unfairly disadvantages honest businesses by undercutting prices and leaves suppliers with unpaid debts.”

Further, the ATO has funded court-appointed liquidators, Pitcher Partners, to investigate the affairs and conduct of those entities before any further legal action by the Commonwealth is considered.

Mr Day said its main concern is with illegal phoenix activity where a company is deliberately liquidated to avoid paying creditors, taxes and employee entitlements, and that phoenix operators typically transfer the assets to a new entity, and continue operating the same or a similar business under the same effective ownership.

He noted common warning signs of illegal phoenix activity include unpaid super or other employee entitlements, unpaid invoices, unrealistically low quotes that undercut other contractors, and new companies being established overnight to carry on the same business as a former company in the same business premises and with the same phone number.

“We pursue those who try to gain an unfair advantage by avoiding their tax obligations, to protect the majority of business operators and directors who do the right thing,” Mr Day said.

“Our focus is on detecting those who promote and facilitate illegal phoenix behaviour, and disrupting those who willingly engage in phoenixing.”

Last week, the government opened up for consultation its proposed package of reforms to tackle illegal phoenixing.

Submissions to the consultation close on 27 September.