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  • How to avoid illegal phoenix activity

    Illegal phoenix activity is when a company shuts down to avoid paying its debts. A new company is then started to continue the same business activities, without the debt. When this happens:

    • employees miss out on wages, superannuation and entitlements
    • other businesses are put at a competitive disadvantage
    • suppliers or subcontractors are left unpaid
    • the community misses out on revenue that could have contributed to community services.

    We're working with other government agencies through the Phoenix Taskforce to stop illegal phoenix activity.

    Find out about:

    What to look for and how to protect yourself

    Whether you're a business dealing with other businesses, a contractor, or an employee, there are signs that a business could be involved in illegal phoenix activity.

    If you're running a business

    Look out for any of the following signs that a company you work with may be involved in illegal phoenix activity:

    • quotes are lower than market value
    • company directors have been involved with liquidated entities before
    • requests for payments to go to a new company
    • changes to the company's directors or company's name, while the manager and staff remain the same.

    Before you work with another business

    Before you work with someone else’s business, check them out thoroughly by:

    • confirming they're registered and their Australian business number (ABN) is valid at ABN LookupExternal Link (in English)
    • searching the ASIC Connect registersExternal Link (in English) to check they're a registered entity and not in liquidation or external administration
    • asking for references
    • doing a credit check on them
    • searching online to see if the company or its directors have any negative media reports
    • asking for upfront payments, cash on delivery, payments in instalments, or ensuring you’re taking a large enough deposit.

    If you're an employee or contractor

    If you're working for a company, look out for these warning signs that your employer may be involved in phoenix activities:

    • you don't receive a pay slip
    • the company ABN and name changes, but the phone number or address stays the same
    • your super or other employment entitlements are not being paid
    • your pay is late, less than what it should be, or under the minimum wage
    • your pay slip shows a different employer name to who you believe you work for.

    To protect yourself from potential phoenix activity, you can:

    • phone your superannuation fund to check that your super is being paid
    • if your employer reports through Single Touch Payroll – check your super in real time by logging in to myGov and accessing ATO online services
    • check your pay slip for changes to your employer's name or details
    • search online to check for any negative reviews or media coverage.

    If you're being paid irregularly – ask why. You can also contact the Fair Work OmbudsmanExternal Link for advice.

    See also:

    Visa holders

    If you're working in Australia on a 457 or Temporary Skills Shortage visa, you must be working for the business that sponsored your visa. If you're working for a business that isn't your sponsor business, you may be missing out on employee entitlements or being paid less than the award rate.

    There are resources available to help you protect yourself from potential phoenix employers.

    See also:

    If your business is struggling

    If you’re a director and your business is having difficulties, an adviser may contact you to suggest advice. While most advisers do the right thing, watch out for advisers who recommend actions that could be illegal. This includes advising people to participate in illegal phoenix activity. If you follow their advice, you put yourself at risk. You could receive a fine, a criminal conviction or even a jail term.

    Be cautious of advisers who:

    • are not registered with a relevant statutory body or a member of a professional association
    • claim to give pre-insolvency advice and encourage you to engage in inappropriate or even illegal activity.
    • contact you after your creditor has taken court action
    • suggest that you transfer your assets to a third party without payment
    • offer advice on restructuring your business to avoid paying debts or other obligations
    • offer you a fee based on a percentage of your debt or obligations
    • tell you they know a liquidator who will protect your personal interests or assets
    • tell you about a valuer who can under-value any assets
    • ask you to provide incorrect information to authorities
    • suggest you can withhold or destroy relevant records to prevent access by the liquidator or bankruptcy trustee
    • suggest that they deal with the liquidator or trustee on your behalf.

    Get advice from a registered professional

    If your business is experiencing difficulties, it's important to take action and get advice straight away from a registered professional.

    If you need to wind up your company or restructure your business, a registered liquidator or registered trustee will be able to help you.

    See also:

    Report suspected phoenix activity

    We work with other Australian Government agencies to stop illegal 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. You can:

    • phone us on 1800 060 062
    • phone us through the Translating and Interpreting Service on 13 14 50 if you prefer to speak to us in your language
    • fill out the tip-off form online – visit ato.gov.au/tipoff (in English).

    You can also contact the Fair Work Ombudsman at fairwork.gov.auExternal Link or phone them on 13 13 94.

    We take all reports seriously. Due to privacy laws, we can’t give you any updates or tell you the outcome of the information you provide.

    See also:

    • Making a tip-off (in [Language])
      Last modified: 09 Mar 2021QC 44726