In just the past two years local companies involved in the hospitality industry, training services, automotive and housing manufacture and building have all gone into liquidation owing hundreds of thousands of dollars, only to resurface days or weeks later as slightly altered entities, often with family members as new directors.

The practice is estimated to cost the Australian economy in the order of $5 billion a year, but the personal cost to employees and small businesses left without wages, entitlements and income is just as damaging.

Now the Federal Government has taken action to reduce the ability of company directors to phoenix businesses, following the release of the Phoenix Taskforce report, the product of a combined effort of 30 government agencies.

Kelly O'Dwyer, Minister for Revenue and Financial Services, spoke to The Courier about how the creation of new offences around phoenixing are designed to crack down on the practice.

“These reforms are aimed at cracking down on dodgy and dishonest directors,” said the minister.

“We have created new phoenixing offences that attract penalties up to 10 years imprisonment. They can be fined $945,000 or three times the benefit obtained, or both.

“There will be laws against directors backdating resignations in order to avoid liability, and they will be made personally liable through penalty provisions for such things as GST and luxury car taxes.”

Ms O’Dwyer said the Australian Securities and Investments Commission (ASIC) would be given expanded clawback powers to seize assets and increase surveillance of businesses and directors it deems suspect, while the Australian Taxation Office (ATO) will gain extended powers to ensure they can retain refunds where outstanding tax liabilities exist.

“The actions of these dishonest company directors in creating shell companies and in stripping assets, in denying staff and suppliers their rightful income, damages other small businesses and damages the community through lost taxes that go to funding schools and other government investment.

“We have looked at all the elements which go into this type of criminal behaviour, and created an overarching approach, stripping away the silos that prevented agencies working together effectively in the past.”

The minister also announced the creation of a Phoenix Hotline and urged anyone to call the number if they were worried or concerned about being ripped off by a dodgy director, or if they felt they had not been paid their superannuation guarantee entitlements or had any other concerns.

The Phoenix Hotline is 1800 807 875, or online here.