Mid last year, the ATO was given new powers that provide greater protection for certain employee entitlements. Company directors, especially those suspected to be engaged in fraudulent phoenix activity, now have an increased level of personal liability for unpaid and unreported superannuation guarantee and PAYG withholding. These amendments help protect workers' entitlements and strengthen directors' obligations.
David Bradbury, the Assistant Treasurer said, 'These changes are part of the government's continued commitment to maintaining the integrity, equity and fairness of the tax system.'
'The government is committed to protecting workers' entitlements', said Mr Bradbury.
'This legislation makes it clear that directors have an obligation to ensure that provision is made for the ongoing payment of workers' super.
'It also ensures that fraudulent directors who use phoenix companies to try and avoid their debts can be held personally liable for their PAYG withholding and super obligations.'
Ten key government agencies are working with the ATO to deter this detrimental behaviour, as part of the Inter-Agency Phoenix Forum. Working together to share information and expertise strengthens the impact of government in deterring, detecting and taking action to address this behaviour. This includes indentifying company directors and others who intentionally participate in illegal phoenix activity.
Recently, the ATO obtained data from the Department of Education, Employment and Workplace Relations (DEEWR) about the General Employee Entitlement and Redundancy Scheme. This data proved to be valuable intelligence, which the ATO is using to assist in the identification of fraudulent phoenix operators.
ATO phoenix audits often lead to detection of other offences, both civil and criminal. This includes false and misleading statements made on tax returns or business activity statements, and defrauding of the revenue system. Here are some examples of recent phoenix-related prosecutions:
Case 1: A finance broker and unregistered tax agent was sentenced in Sydney District Court to nine years jail (six years three months non-parole) for 57 counts of tax fraud totalling over $720,000. The court found the finance broker prepared 57 fraudulent tax returns in the names of 36 taxpayers, some of whom were not even in the country for the period when it was reported they earned Australian income.
Case 2: A person was sentenced in Perth District Court to three years jail (20 months non-parole) for GST-related fraud. The court found they had understated cash sales of a business they were sole director of by more than $5.6 million and underpaid GST by $514,000.
Case 3: A person was sentenced in the Supreme Court of Western Australia to five years three months jail (three years non-parole) for defrauding $6.7 million in pay as you earn (PAYE) monies. The court found they had avoided paying group tax by creating bogus group certificates, shuffling employees between companies and cancelling company registrations with the ATO.
These results show that agencies are having an impact in addressing fraudulent phoenix activity, helping to protect employees and providing a level playing field for business.
For more information about how the ATO is addressing fraudulent phoenix activity, visit Tax crime.
End of further information
Fraudulent phoenix activity is the evasion of tax and super guarantee liabilities through the deliberate, systematic and sometimes cyclic liquidation of related corporate trading entities.
It has a detrimental effect upon the whole community, the economy and the regulatory effectiveness of government agencies. It affects employees, unfairly disadvantages businesses, government and the economic environment. It also affects the revenue of Australia.