Changes to the tax law to counter phoenix activities

In the 2010-11 Federal Budget, the government announced it would strengthen the tax law to counter fraudulent phoenix activity, which involves a company intentionally accumulating debts to improve cash flow or wealth and then liquidating to avoid paying the debt. The business is then continued as another corporate entity, controlled by the same person or group and free of their previous debts and liabilities.

With effect from royal assent on 29 June 2012, the law changes protect worker's entitlements and strengthen director's obligations by:

• extending the director penalty regime and the estimates regime to include unpaid superannuation guarantee charge
• ensuring that directors cannot discharge their director penalties by placing their company into administration or liquidation when pay as you go (PAYG) withholding or superannuation guarantee charge remains unpaid and unreported three months after the due date
• in some instances, making directors and their associates liable to PAYG withholding non-compliance tax, a tax equivalent to reducing PAYG credit entitlements where the company has failed to pay amounts withheld to the Commissioner.

Media release

For more information, refer to the following:

• media release 056/2012 Tax laws amendments pass the Parliament issued 28 June 2012 by the Assistant Treasurer
• media release 016/2012 Protecting worker's entitlements and strengthening director obligations issued 18 April 2012 by the Assistant Treasurer
• media release 138/2011 Protecting employee super and strengthening the obligations of company directors issued 13 October 2011 by the Assistant Treasurer
• media release 101/2011 Countering fraudulent phoenix activity by strengthening company and directors' obligations issued 5 July 2011 by the Assistant Treasurer.

Legislation and supporting material

The following legislation received royal assent on 29 June 2012:

• Pay As You Go Withholding Non-compliance Tax Act 2012 (Act No. 95 of 2012)
• Tax Laws Amendment (2012 Measures No. 2) Act 2012
• Explanatory Memorandum.

More information For more information, refer to: Strengthening director obligations the Federal Budget 2011-12 Exposure draft and draft Explanatory Memorandum issued by Treasury on 18 April 2012.