New Measures To Combat Illegal Phoenixing

New laws are now in place to target illegal phoenixing of companies, which by some estimates costs businesses, employees and governments more than $2 billion a year.

Phoenix activity is when a new company is created – “rising from the ashes” of another company that was in debt and has been deliberate liquidated – to continue the business of the old company while avoiding having to pay the debts. Recent estimates are that illegal phoenix activity directly costs Australian businesses , employees and governments between $2.85 billion and $5.13 billions each year.

While there is no Australian legislative definition of “illegal phoenixing” or “phoenixing activity”, at its core it is understood as the use of serial deliberate insolvency as a business model to avoid paying company debts. To combat this, the new laws target a range of behaviours, including preventing property transfers to defeat creditors, improving accountability of resigning directors, allowing the ATO to collect estimates of anticipated GST liabilities and authorising the ATO to retain tax refunds.

To combat this type of debt and tax evasion, the new laws target a range of behaviours, including preventing property transfers to defeat creditors, improving the accountability requirements for resigning company directors, allowing the ATO to collect estimates of anticipated GST liabilities and authorising the ATO to retain tax refunds where lodgements are outstanding.