The Morrison Government is continuing its crackdown on phoenixing, protecting workers and levelling the playing field for businesses.
Our package of reforms, introduced in Parliament today, gives regulators the additional enforcement and regulatory powers they need to detect and disrupt phoenix activity, and to prosecute directors and other professional advisers who engage in or facilitate this activity.
Already the Government has provided additional funding of $8.7 million over 4 years to the Assetless Administration Fund, launched a new Phoenix Hotline, which makes it easier to report suspected phoenix behaviour to the ATO, introduced legislation to address corporate misuse of the Fair Entitlements Guarantee scheme, tightened the GST legislation in relation to gold trading and sales of new residential premises, and set up the Phoenix, Black Economy and Serious Financial Crime Taskforces.
The Government’s latest package of reforms to corporations and tax laws will deter and disrupt the core behaviours of phoenix operators by:
- Strengthening enforcement options through the introduction of new phoenix offences and civil penalty provisions, carrying the highest penalties available under the law, to target both those who conduct and those who facilitate (e.g. pre-insolvency advisers) illegal asset stripping;
- Introducing a new recovery power for the Australian Securities and Investments Commission and extending the recovery provisions available to liquidators, to enhance the recovery of assets lost through illegal asset stripping, for the benefit of employees and other creditors;
- Preventing directors improperly backdating resignations to avoid liability or prosecution;
- Limiting the ability of directors to resign when this would leave the company as an empty corporate shell with no directors;
- Extending the director penalty provisions to make directors personally liable for their company’s GST and related liabilities; and
- Expanding the ATO’s power to retain refunds where there are outstanding tax lodgements.
The legislation is targeted at those who misuse the corporate form and builds in a number of important safeguards to ensure the new laws do not affect honest businesses and genuine efforts to rescue a business in financial distress.
These safeguards include an extension to the Government’s already legislated safe harbour for directors of companies in financial distress. The legislation also includes amendments to the safe harbour to ensure these important provisions continue to operate as intended and continue to promote a culture of business restructure and turnaround.
In addition to this legislation, the Government has also amended the Insolvency Practice Rules to restrict the voting rights of certain creditors related to the phoenix company to ensure the interests of honest creditors are not affected by those complicit in illegal phoenix activity.