For several years, the federal government and regulators have heralded a compliance focus on phoenix activity. Recently, “The Economic Impacts of Potential Illegal Phoenix Activity” whitepaper was released by PWC (commissioned by the ATO, ASIC and the Fair Work Ombudsman) to provide insight into the scale and breadth of the issue. The research estimates the annual direct impact of illegal phoenix activity on businesses, employees and government to be between $2.85 and $5.13 billion per annum.
The paper suggests that the cost to business from a) unpaid trade creditors is between $1.2 billion to $3.2 billion, b) unpaid entitlements to employees to be $431 million and, c) unpaid tax and compliance costs to the government to be $1.6 billion.
The Government also recently announced the Director Penalty Regime (DPR) will be extended to GST, luxury car tax and wine equalization tax. This aims to make Directors personally liable for company debts as part of a broader package of reforms aimed to target those who repeatedly misuse corporate structures and extends to stronger regulatory powers.
Employees, creditors, competing businesses and the general public can confidentially provide information or report their concerns about possible phoenix behavior by calling the Phoenix Hotline on 1800 807 875 or online at the ATO website. Their disclosures will be protected by privacy laws and the government’s legislative action in protecting whistle blowers.