16 July 2018

Doorstop interview, Australian Taxation Office


Subjects: New Phoenix Hotline, ATO and ASIC successes in pursuing illegal phoenixers


My name is Kelly O'Dwyer, I am the Minister for Revenue and Financial Services and I am joined today by Will Day who is the Deputy Commissioner of the Australian Taxation Office and Warren Day who is the Victorian Regional Commissioner of ASIC. And we're here today to talk about illegal phoenixing.

Illegal phoenixing hurts hardworking Australians including company employees, suppliers, customers, competing businesses and importantly also Australian taxpayers.

Illegal phoenixing occurs when controllers of a company strip the company's assets and transfer them to another company to avoid paying the original company's debts.

Today I am announcing the release of the Phoenix Taskforce's report which looks at the direct impact of potential illegal phoenixing on individuals and on our economy more broadly. They estimate it's up to around $5 billion per annum which is very significant.

It includes of course unpaid creditors, unpaid employee entitlements and also unpaid taxes to name just a few.

This is why the Turnbull Government is cracking down on dodgy directors doing the wrong thing with a whole range of reforms – including new phoenixing offences for those who conduct and who facilitate illegal phoenixing activities.

This will mean that people who do the wrong thing can be jailed for up to ten years, or they could be fined $945,000 or three times the benefit obtained or both. These are very significant new measures.

Directors will also be made personally liable for indirect taxes through the extended director penalty provisions which will mean GST payments, luxury car tax payments and also wine equalisation tax payments as well.

Directors are going to be prevented from back dating their resignations, which we know some of them have done in order to avoid personal liability. And sole directors will be prevented from resigning so that they are leaving only an empty corporate shell with no directors which, again, can hurt hardworking Australians.

The ATO's powers will be extended to ensure that they can retain refunds where there are outstanding tax liabilities. ASIC will also have a new claw back power to make sure that where assets need to be returned to a company, so that creditors can actually get access to those assets, that can happen.

Now this package is based on incredibly detailed work that has been done by the Phoenixing Taskforce which has involved more than 30 agencies. I want to commend particularly the Australian Taxation Office and ASIC for their leadership of this taskforce. It will help our regulators identify this illegal phoenixing activity and, most importantly, enable them to take action under the reforms that the Government is introducing.

I am also delighted to be able to announce today that there is a new Phoenixing Hotline that has been put in place so that anyone, whether they be a small business or an individual, can telephone up and can report people, dodgy directors, for doing the wrong thing so that the full force of the law can bear down upon them.

Without further ado I would like to be able to introduce Will Day who will talk about the Australian Taxation Office and their achievements in this space, and then I would also like to be able to introduce Warren Day to talk about ASIC's achievements as well.


Thank you Minister, it's good to be here today to talk about the significant progress that the Phoenix Taskforce, which the ATO helps to lead, has already made in both quantifying and tackling illegal phoenix activity. Illegal phoenix activity has a significant impact on the economy. A new report prepared by PwC and commissioned by the Phoenix Taskforce, as the Minister has said, estimates that illegal phoenix activity costs employees, businesses and Government, at both federal and state levels, over $5.13 billion a year.

When a company phoenixes it is effectively stealing. It is stealing from employees, through wages and superannuation that should be paid, it's disadvantaging legitimate businesses and it steals from Government revenue that should be used towards essential community services.

Through the Phoenix Taskforce we harness the capability and the skills of 30 government agencies at both the federal and state level. We do this to support honest businesses, employees and suppliers and we are already getting results. Over the last financial year the ATO conducted more than 340 audits and reviews. We raised tax bills of more than $270 million and collected $190 million in cash. In addition the Serious Financial Crime Taskforce is stepping up its focus on illegal phoenix activity and is currently dealing with eight criminal referrals. We've also seen strong indicators that we are having success in raising public awareness of phoenix activity and how to avoid being victimised. For example we have seen a nearly 20 per cent increase in our community referrals over the last 12 months. Today we launched the new phoenix hotline – this will bring together, in a single location, reporting of illegal phoenix activity to the Phoenix Taskforce. This will enable us to better target our activities to support those businesses and individuals and to deal with those who cheat the system, including those who facilitate their illegal behaviour.


Thanks Will, and Warren would you like to talk about ASIC's achievements?


Yes, Minister we welcome the release of the report as it is a highly valuable document to us in understanding the nature, scope and size of the problem but also it provides us with a measurement tool to evaluate whether our strategies are having their desired and necessary impact. ASIC and our phoenix partners are working together to deter, disrupt and detect directors and others who engage and facilitate illegal phoenix activity and this report is very much a product of that partnership.

We use a number of regulatory activities to disrupt illegal phoenix activity including proactive surveillance on companies, directors and professional facilitators, implementing compliance programs and take administrative, civil and criminal enforcement action. In fact in 2017-2018 ASIC completed 53 surveillances and investigations, had a number of prosecutions that lead to terms of imprisonment, but also added to the data and other information and knowledge that ASIC has in this space. These strategies aim to deter directors and facilitators from engaging in illegal phoenix activity, hold them accountable if found to have breached the law and protect creditors, employees, consumers and the general public as well as Government revenue. For more information about that you can read our annual report and also our business plan.

Lastly, I would like to say that the Phoenix Taskforce uses data matching tools to identify, manage and monitor suspected illegal phoenix activity. Indeed the sharing and use of data from cross taskforce activity, such as the Phoenix Taskforce but also the Serious Financial Crime Taskforce, is revealing new targets and threats in the phoenix space and has been valuable to ASIC in terms of target selection and identification for our next activities.

Thank you Minister.


Excellent. I am going to give the number, the number that I think people need to be aware of, and that is the Phoenix Hotline which is 1800 807 875, that's 1800 807 875. Make sure that you contact the hotline if you are worried or concerned about being ripped off by someone who is a dodgy director, if you're concerned that you haven't been paid your superannuation guarantee entitlements, we want to make sure that you are paid the money that is owed to you. That is why this hotline is in place, along with a raft of other Government measures to make sure that people do the right thing and if they don't that they are punished under the law with up to ten years in jail.

Thank you.