The federal government has revealed new laws in an effort to crack down on illegal phoenixing activity, which is estimated to cost the Australian economy up to $3.2 billion each year.
The new laws were announced today by the Minister for Revenue and Financial Services Kelly O'Dwyer after the reforms were approved by cabinet yesterday.
The new measures include the introduction of unique identification numbers for Australian company directors, which will allow government agencies and databases like the Australian Taxation Office (ATO) to track directors and their relationships to other companies.
“The Turnbull Government is committed to ensuring individuals who engage in illegal phoenixing activity are held to account and that the regulators are equipped to take stronger action to both deter and penalise phoenixing activity for the benefit of all Australians,” O'Dwyer said.
Director identification numbers were first proposed by the Labor party in May. Labor MP Andrew Leigh said he hoped the government would adopt the rest of his party's reforms, which includes increasing penalties and an objective test for transactions depriving employees of their entitlements.
"We've been calling for the introduction of director ID numbers since May, with support from the Productivity Commission, Australian Institute of Company Directors and Australian Small Business and Family Enterprise Ombudsman," Leigh said.
"It seems that - finally - public support has grown loud enough for the Turnbull government to pay attention."
Suspected phoenix operators will face further scrutiny with a spate of new restrictions. Before starting a new company, suspected directors will be required to submit a security deposit to the ATO, which can be used to recover debts. They will be unable to appoint a liquidator to related entities if they have a phoenixing history.
The ATO will be given more powers as well, like being able to withhold refunds from companies with a phoenixing history, and will be able to commence immediate debt recovery after a Director Penalty Notice has been issued.
The reforms also include specific offences that target advisers to phoenix operators.
The crackdown on phoenixing comes in the wake of one of the largest white collar crimes in Australian history which embroiled the tax agency. The directors of contract payment firm Plutus Payroll were arrested after allegedly defrauding the ATO of $165 million through illegal activity including phoenixing. ATO deputy commissioner Michael Cranston was charged with abusing his position as a public official, after allegedly advising his son, a director of Plutus, on how to avoid being caught for tax fraud.
According to the Fair Work Ombudsman, illegal phoenixing costs the Australian economy anywhere between $1.8 billion and $3.2 billion a year.
Updated 12:01pm on 12 September to include official statement from MP Kelly O'Dwyer.