Help stop Phoenix business activity
Fraudulent phoenix activity occurs where a company deliberately liquidates to avoid paying creditors, taxes and employee entitlements. They transfer the assets to a new company and continue operating the same or a similar business with the same ownership.
Phoenix activity has negative impacts on the business community, employees and contractors, the government and the environment, such as:
- non-payment of wages, superannuation and other entitlements to workers
- an unfair competitive advantage over other businesses
- suppliers not being paid
- loss of government revenue that funds important community services like schools and hospitals.
Signs to look out for
Whether you are a business dealing with other businesses, or a contractor or employee, there are signs to look out for that may indicate a company is participating in, or about to participate in, fraudulent phoenix activity.
- the company is able to compete unfairly with other contractors by charging less for their services
- the company changes its name (look at your payslip for changes in the name of the company)
- superannuation payments are not made
- company owners or directors enjoy an extravagant lifestyle that doesn’t seem to match their income.
There are other signs that may indicate a new business is the result of phoenix activity, such as:
- the directors of the new company are family members of the director of the former company or are close associates, such as managers
- a similar trading name is used by the new company
- the same business location and phone number (particularly mobile number) are used by the new company.
You should be aware of the early signs of phoenix behaviour so you can protect yourself.
Case study: jail time for phoenix operators
A Perth-based earthmoving, garden supplies and property development business created fake payment summaries, moved employees between companies and failed to send monies withheld from employees' wages to the ATO.
The business owner then deregistered the (non-compliant) companies to reduce the risk of detection by authorities.
The business was investigated and found to be involved in fraudulent phoenix activity.
The principal company director was sentenced to five years and three months jail for defrauding the Commonwealth of $6.7 million in unpaid taxes. He was also bankrupted following an investigation into his personal tax affairs. A number of other people associated with this fraud were also prosecuted and jailed, including a former tax agent.
What you can do
Contractors and sub-contractors
If you are a contractor or sub-contractor:
- confirm the business is registered and the Australian business number (ABN) is valid -– visit abr.business.gov.auExternal Link to check
- ask for references
- do a credit check on the business
- search for any negative media reports online about the business.
If you are an employee and you think that the business you work for is participating in, or going to participate in, fraudulent phoenix activity, check with your super fund to make sure your super payments are being made by your employer.
If the business changes its name, changes information on your payslip or doesn't pay you regularly, you should ask why.
- If you have concerns, you can contact the Fair Work Ombudsman.
457 visa holders
If you are working in Australia on a 457 visa, you must be working for the business that sponsored your visa. If you are working for a business that is not your sponsor business, you may be missing out on employee entitlements or being paid less than the award rate.
Report suspected phoenix activity
- The Australian Taxation Office (ATO) is working with other Australian Government agencies to stop fraudulent phoenix activity. There are serious consequences for people involved in fraudulent phoenix activity, including jail, fines and the taking away of personal assets.
If you have information about someone you think may be involved in phoenix activity, you can report it confidentially to the ATO:
- by phone on 1800 060 062. If you do not speak English well and need help with your call, phone the Translating and Interpreting Service (TIS) on 13 14 50
- by filling out a form online – visit ato.gov.au/Forms and search for ‘Tax evasion reporting form’.
You can also contact the Fair Work Ombudsman at fairwork.gov.auExternal Link or phone them on 13 13 94.
Fraudulent phoenix activity occurs where a company deliberately liquidates to avoid paying creditors, taxes and employee entitlements. They transfer the assets to a new company and continue operating the same or a similar business with the same ownership