• Inter-Agency Phoenix Forum minutes - 12 November 2013

    Meeting details

    Venue:

    ATO
    6-20 Gladstone Street
    MELBOURNE

     

     

    Date:

    12 November 2013

     

     

    Start:

    10.00am

    Finish:

    1.00pm

    Chair:

    Michael Cranston

     

     

    Contact and Secretariat:

    Michael Scammell

    Contact phone:

    (03) 9275 2305

    Attendees

    Australian Crime Commission (ACC)

    • David Ross
     

    Australian Federal Police (AFP)

    • Linda Champion
     

    Australian Securities & Investments Commission (ASIC)

    • Joe Zubcic
     

    Fair Work Ombudsman (FWO)

    • Aaron Rilston
     

    Clean Energy Regulator (CER)

    • Dean Smeulders
    • Greg Wilson
     

    Department of Education, Employment and Workplace Relations (DEEWR)

    • Sue Saunders
    • Justin Bell
     

    Department of Sustainability, Environment, Water, Population and Communities (SEWPaC)

    • Mr Bull
     

    Fair Work Building & Construction (FWBC)

    • Peter Darlaston
     

    State Revenue Office - Victoria (SRO)

    • Christian Birke
     

    Australian Taxation Office (ATO)

    • Bruce Collins
    • Debbie Rawlings
    • Michael Seddon
    • Michael Scammell
    • Adrian Clarke
     

    Guests

    Australian Taxation Office (ATO)

    • Jessica Billimoria
     

    Australian Business Register (ABR)

    • Chris Bailey
     

    Department of Immigration & Border Protection (IMMI)

    • Angelo Fitsioris
    • Vanessa Russo
     

    Apologies

    State Revenue Office (SRO)

    • Michael Sofiak
     

    Australian Taxation Office (ATO)

    • Brett Martin
     

    Department of Human Services

    • Mark Salmon
     

    Department of Sustainability, Environment, Water, Population & Communities (SEWPaC)

    • Matthew Dadswell
     

    Agenda items

    1. Welcome and introductions

    Michael Cranston welcomed everyone to the meeting and passed on apologies on behalf of those who were unable to attend. The following guests were also acknowledged:

    • Chris Bailey - Australian Business Register (agenda 4)
    • Angelo Fitsioris and Vanessa Russo – Department of Immigration and Border Protection Authority (agenda 5)
    • Debbie Rawlings - Australian Taxation Office (agenda 7)
    • Jessica Billimoria – Australian Taxation Office (agenda 9)

    David Ross confirmed he would be attending future meetings as the representative of the ACC.

    Michael thanked Bruce Collins for his chairing of the last meeting.

    2. Acceptance of previous draft minutes (24 July 2013) & review of action items

    Draft minutes from 24 July 2013 were accepted.

    Review of Action items

    Meeting 27032013

    3.1 Brett Bassett to refer Sue Saunders (DEEWR) questions to Adrian Brown in ASIC in terms of ASIC’s IP compliance and oversight program. Update: DEEWR have opened a dialogue about IP compliance issues and have also passed some data sets to ASIC to support their IP compliance programs - Completed.

    Meeting 24072013

    1.1: ABR will speak with their executive regarding the possibility of the agency becoming a member of this forum. Update: ABR currently considering whether to take up ongoing membership with Forum - Carried over.

    2.1: The ATO will forward DHS reference to Strengthening director obligations and copies of 2 fact sheets explaining the ATO’s new legislation. Update: The 2 fact sheets are now live at ato.gov - Completed.

    3.1: The ATO will discuss matching MARA data with the Phoenix Risk Model and provide aggregate findings back to MARA - Carried over.

    4.1: Amend the document for creating a phoenix prescribed taskforce and include reference to the new ABR watch list. Update: the Phoenix prescribed taskforce documents have been updated to include reference to the new ABR watch list - Completed.

    5.1: Provide an update on the Phoenix Risk Model at the next meeting. Update: See Agenda Item 3 - Completed.

    3. Update on the Phoenix Risk Model (Michael Seddon)

    • Members were advised that a Phoenix Risk Model has been developed. While currently running as a prototype it needs to be moved onto a more sustainable platform. Some initial data based on the model:
      • 139 confirmed Phoenix groups
      • 1300 linked entities
      • 128,000 potential Phoenixes
      • 520,000 linked entities with 34,000 in the high risk space
      • a current debt of $2.3 billion
       
    • A PwC report claims the annual cost of Phoenix activity to the Australian economy is $3.2 billion. It was noted though that there is also the additional cost of regulators fighting the problem.
    • Clarification on the issue of debt in relation to PAYG was sought. It was explained that the debt also includes GST.
    • While a significant figure it was noted that the full extent of the problem is still not known. It should not just be looked at from a tax perspective but other factors as well. The more data inputted the richer the picture.
    • The project needs to be put into a sustainable platform.
    • We are currently using the ATO’s group wealth system to create a phoenix population.
    • The ATO said it is important to see what information we can share with other agencies.
    • It is expected that linking with promoters will provide a leverage point.

    4. Australian Business Register update (Chris Bailey)

    • ABR provided a presentation and update on the Register. The Phoenix Watch List has just started and is still in the design phase. A blueprint has been created and discussions are currently being held for input from most partner agencies.
    • Once finalised the blueprint will go out to agencies for feedback. It will also be looked at by the ATO’s internal IT areas to see that it is able to accommodate all its functions as necessary.
    • A data template has also been created so information can be shared at the national level.
    • Partner agencies have asked that they be provided with alerts and notifications as part of the register’s functionality. At this stage it was noted the register is more of a ‘capture database’. However this is only phase 1 of the development process. The possibility of developing an alert system using ABNs is being investigated
    • The ABR has confirmed that it wants a permanent seat at the forum.

    5. Department of Immigration and Border Protection - business issues from a 457 programme perspective (Angelo Fitsioris & Vanessa Russo)

    • IMMI gave a presentation on the 457 and Permanent Employer sponsored programmes and how they might relate to issues around Phoenix.
    • There are currently 22,000 entities acting as 457 sponsors with over 100,000 linked visas. Last year 68 infringement notices in relation to 457 were issued with 3 cases going to court.
    • Both these programmes create Phoenix risks when they are not used to fill a genuine skill shortage. The two key risks being:
      • When the visa holder is linked to a no longer existing entity
      • After 2 years, liquidation occurs of an entity used to sponsor a visa
       
    • In terms of Phoenix what Immigration would most like is to source information on 457 sponsors who are no longer operating.
    • Often up to $40,000 is being paid to businesses to act as sponsor creating an incentive to create entities solely for the purpose of sponsoring people.
    • Immigration does a number of checks on applicants.
      • Financial records
      • Processing records
      • Predecision site visits (1500 of these done per year)
      • ASIC information
       
    • There are also other issues around whether Visa holders are paying tax as well as whether they are doing the actual work they nominated to do.
    • Immigration does ask for tax statements as a way of establishing bona fides.
    • The possibility of data matching with the ATO was discussed as well as other opportunities for linkages and information sharing between agencies. This may be a possible future area of reform.
    • So far Immigration has only had one entity under liquidation that has tried to sponsor 457 visa but they are monitoring this as a potential future issue
    • Some examples were given of potential phoenix issues faced:
      • One entity sponsored a dental nurse and an aircraft technician – this raised some questions
      • A Korean national - who came to Australia from New Zealand and had a history of fraudulent activity - has lodged 200 visa applications as a director of 40 entities - Immigration are currently reviewing these cases.
       
    • Visa applicants are in some cases giving their sponsors $40,000 to organise work for them in Australia but sometimes the sponsor then goes broke or closes shop and the applicants then ask Immigration for help.

    6. Prescribed/regulated Phoenix Taskforce (Bruce Collins) - update and next steps

    • Agencies have been written to regarding the possibility of creating a prescribed Phoenix taskforce. Most have responded with interest
    • ATO are now considering options around creating the taskforce. It was noted that work around Phoenix is about protection of national finances
    • There is also currently a parallel proposal looking to focus on ‘serious financial crime’. This would be a ‘super taskforce’ with Phoenix one element within it.
    • If the Government decides to go ahead with the proposal for a Phoenix taskforce enabling legislation could be 6-9 months away. The proposed taskforce would operate like Wickenby with all agencies participating in the discussion. Work is currently being done preparing a proposal for Treasury.
    • Three levels to this work were noted as key:
      • Matching databases
      • Specific taskforce behaviour
      • Information sharing
      • Financial – scrutiny/tests checks
       
    • The ACC spoke about the Fusion Centre saying the ATO can send information to the ACC. The ATO was thanked for its input to this process so far.
    • It was noted that Departmental Secretaries had been written to with most responding positively so far to the proposal.
    • It was suggested that a law design workshop may be an option to consider potential legislative changes across all member agencies with a particular focus on tax and compliance issues.

    Action item

    Description

    Responsibility

    6

    6.1: The ATO will investigate the possibility of holding a cross agencies law design workshop and will report back to the Forum at next meeting.

    6.2: ATO to confirm and ensure all Secretaries have been written to regarding a possible Phoenix Taskforce.

    6.3: ATO to write to the Secretary of DEEWR regarding the proposal.

    Michael Seddon

    7. Disengaged Property Developer (Phoenix) risk update (Debbie Rawlings)

    • There is a GST focus on the building and construction industry that do not pay the GST until a sale has occurred and yet are legally entitled to claim input tax credits during the project’s roll-out.
    • Current watch list consists of 2169 groups with 30,000 entities (most in NSW)
    • Estimate is that the ATO has written off $10.8 billion over the last 10 years
    • Property Developers – 2000+ individuals on watch list with $10.8 billion already written off. This is an ongoing issue for the ATO
    • The ATO deal with two different categories
      • Those with a history of insolvency
      • Those who cease to interact with the ATO but don’t go insolvent
       
    • ATO is notified whenever a new entity is created. They are also contacted whenever a refund is claimed. At this point the question is asked: ‘what are you doing? When and where will you sell?’ At this stage the ATO calls the ‘controlling mind’ within the project in and audit the whole group. This is a labour intensive and time consuming process.
    • There are a lot of false depositors. 40 percent put themselves into bankruptcy
    • None of this is difficult to do which is part of the phoenix problem
    • It was noted that much of this behaviour is criminal and that there is probably a need for a strategy to be developed.
    • The following observations in summary were made:
      • The ATO should get further information from the Department of Employment which can then be disseminated to members
      • The ATO can refer issues to ASIC
      • The ATO can refer issues to the SRO
       
    • It was noted that the ATO can take some actions - can issue Director Penalty Notices and if no response within 90 days you are personally liable.
    • The ACC said it has the capability for intelligence purposes and can provide the FWBC with typology and data.
    • The ATO said they can get ASIC and Shareholder data and they are using this to build their model. This is real time data which is then used in a data matching exercise.

    Action item

    Description

    Responsibility

    7

    7.1: Property developers’ information to be sourced from the Department of Employment that can be disseminated to members.

    Debbie Rawlings

    8. ASIC update (Joe Zubcic)

    • ASIC are currently looking to identify phoenix operations in key industries. They have undertaken a three month project that looked at 7,500 companies with a focus that included transport, security, cleaning businesses. The project ended in August 2013 and looked at the past 2 years at businesses that have gone into administration, receivership or liquidation. As result of this 850 companies were required to provide a breakdown with overt surveillance of 150.
    • It became apparent during this project that many business don’t know what phoenix activity is. This provides an opportunity for education.
    • There have been a possible 2 referrals for phoenix activity as a result of this project.
    • ASIC has a very strong deterrence focus in its campaigning and notes that surveillance activity raises compliance levels. It will shortly be going live with a small business page on its website.
    • The ATO noted current industry consultation which has included 2,500 names and 7,000 company names handed over to the ATO. There is currently planning for a roundtable consultation meeting on December 6 2013.

    9. Media strategies and messaging (Jessica Billimoria)

    • As part of the ATO’s communications approach for Phoenix, we are planning to take a more proactive approach to media. This approach is documented in a 3-4 page media strategy, which we’ve developed in partnership with the ATO Media Unit.
    • Our approach with this strategy is to be actively looking for opportunities to generate media coverage that will get our messages out into the community
    • Rather than being reactive to things that happen in the media, it is a proactive approach
    • This media strategy is just one layer of our overall approach to engagement around phoenix. The overarching communication strategy sets out the objectives, key messages, and target audience – while this media strategy is one element of our overall communication approach. We will aim to build a picture for the community of what we’re doing to address this risk area, through the media.
    • Key Phoenix events can be used as a launching vehicle to reinforce key messages and outcomes to influence future behaviour. In brief, the strategy identifies key events that we can leverage to encourage media interest in this topic, as well as key journalists that we know are interested in this topic.
    • Phoenix media strategies need to leverage from the cross agency Prescribed Phoenix taskforce (which you will see outlined in the strategy). At this stage, the first key event we see is any announcement of a prescribed interagency taskforce or serious financial crime taskforce – or any significant prosecutions. We anticipate by early next year one of these should happen. Enquiries from the media should be seen as a two-way opportunity.

    Action item

    Description

    Responsibility

    9

    9.1: The draft media strategy will be circulated to members for review. Agencies to identify any potential events or opportunities that can be leveraged for media coverage and share this with the ATO for inclusion in the media strategy.

    9.2: Member agencies to share their key messages about phoenix with the ATO, with a view to developing a whole-of-government key message guide for phoenix.

    9.3: The existing ATO Phoenix communications strategy to be updated to include a cross-agency focus and presented at the next forum meeting.

    Jessica Billimoria

    10. Intelligence sharing:

    • What are we seeing?
    • What are we doing about it?
    • What outcomes have there been achieved?

    ATO

    • Operations working with ASIC and AFP on liquidators and tax agents. There will be more information on this shortly with the potential for action being initiated in the next 2-3 months
    • Other entities identified by ACC. ASIC is also interested. There may also be information released on this soon

    DEEWR

    Data has been provided to the ATO in terms of consultations with action anticipated in the next 12 months. We are looking at the conduct of liquidators.

    IMMI

    Immigration aware of a group creating residency for Chinese citizens and using this as a way to self-sponsor. Interested in identifying groups and their size.

    11. Wrap up and close

    The details of the next meeting are tabled below.

    Date

    March 21, 2014

    Place

    ASIC
    SYDNEY

      Last modified: 14 Oct 2015QC 47091