• Your questions about phoenix answered video transcript

    Further information

    To see the video of this transcript visit Illegal phoenix activity video series.

    End of further information

    Panel members:

    Facilitator: David Koch

    Australian Taxation Office: Michael Cranston

    Australian Securities & Investment Commission: Brett Bassett

    University of Melbourne: Helen Anderson

    Fair Work Ombudsman: Tom O’Shea

    David : Let’s go through some questions that we’ve had sent in to us, and thanks very much for doing that. First one to you Michael; My contract payments are heavily back ended; how can I get assurance my clients are going to be around at the end of a project?

    Michael : A difficult one. I think sometimes, there’s again it’s just having maybe taking some tips from different regulators, for example, trying understanding that there are places you can look up if you’re dealing with a particular business. That you can actually go to Australian Securities & Investments Commission, look up the history of that director, and you can actually look up on the Australian Business Register if they’re real businesses, so there’s some ‘look-up stuff’ that you can do…

    David : So, this is ideal; if you’re in that position, you know you’re at risk, so you’ve got to do more due diligence…

    Michael : More due diligence. And then I think sometimes when you negotiate your contract, sometimes I know it’s difficult but, I think that there would be sort of like a light go on if it was too back ended.

    David : Yeah…

    Michael : …because I would like to get paid as I’m doing work in progress, I need to cover my costs, so depending on what sort of industry you’re in, I would say one of the tips is I wouldn’t, unless I really understood why it was so heavily back ended, I would be negotiating a more regular progress payments. So when something does happen, it’s only in relation to a small period of time. And then also you have to sort of work back in, what would that mean to your cash flow and your financial viability…so there’s some tips.

    David : Yeah! You’re becoming their bank!

    Michael : Absolutely, so got to be looking at, sort of, and maybe you need to get some advice from your accountant in relation to that. So there’s just a couple of tips.

    David : Or, I suppose, explain how you think this is unusual, for your own comfort, ask for other suppliers and referrals if you like, but you do end up paying. Hey can I talk to one of your other suppliers that’s been on this deal, been paid just… and then I’m happy to look at it…

    Michael : I reckon we should hire you David…

    David : No, no… well you see I’m a small business person myself! So, that’s the beauty of being in the media and running your own business. You talk to experts like you guys, pick your brains, and then pinch the ideas and use them yourself, which is good. Because I’ve got a couple of back ended contracts that I’m, going to be checking… checking the business; check the whole lot! Brett, this is a terrific question; “I’ve been scorched by a phoenix business; what are my options for recourse? What can I do about it?”

    Brett : Yep… Umm… It’s a tough question once again because, once you’ve been scorched, to some extent, the role that Australian Securities & Investments Commission has or some of the other regulators have in helping you, won’t probably get your money back. I think that’s fair to say. So, number one, if you have been scorched, then get some legal advice David, think about what your civil options are for you to take your own action. The second thing is, absolutely report it to us, as we said before. We need that information, we absolutely need that information. The third thing is, make sure that you tell other people about it, so that they don’t get scorched, in the industry.

    David : So that might be, you know depending on the business, everything from your local Chamber of Commerce, through to your industry association or whatever…

    Brett : Yeah absolutely…

    David : Ok, yeah… alright.

    Brett : Absolutely. Industry associations are a great source of intelligence for us. Absolutely.

    David : Ok… alright… That’s a really good question, hopefully that’s useful. Also again to you Brett; as a small business I don’t have the time to do proper due diligence… I don’t think that’s any excuse from what we’re hearing at the moment. Because you’ve got your Business Checker… What can I do to mitigate the risk presented by a phoenix business, with no due diligence?”

    Brett : Well…

    David : It’s probably a silly question, because you’re stupid not to do it if you’ve got a big contract.

    Brett : But unfortunately David, people don’t have the time to do it, there’s no doubt that we understand that…

    David : You’ve got an app!

    Brett :…we’ve got the app…

    David : Instead of going on the AFL app, for ten minutes… You go on your…

    Brett : You go on the app…

    David : …Business Checks!

    Brett : Go on the Business Checks app, absolutely fundamental to it. The other thing as well is, you know we talked about credit scoring; there are a number of credit scoring providers out there that you can actually get access to do a cheap search. Now the Business Checks app, I’ll just plug it one more time, it has links to all of that information for you. And you can even, even if you have been scorched, you can make a report of misconduct from the app as well.

    David : Well... I got to be downloading that app, that’s for sure…! See that’s one of the issues, sort of, Australian Securities & Investments Commission, Tax Office, Fair Work… have all these resources that we just sort of don’t think about. But if we go there, I reckon you’re amazed at what’s available.

    Brett : And I think the ability for us across the agencies, to share information… I mean we have links to ATO information on our website, as do the ATO, as do the Fair Work Ombudsman. So once again what I would say is, it doesn’t matter where you go, if you go to somewhere, you will get directed to the right information.

    David : You share… right Tom, for the employees…?

    Tom : I think I’d echo what Michael and Brett have said… speak to us, speak to one of the other regulators, and speak to us early. The minute you think something isn’t happening, or smells a bit fishy, start asking questions. Ring up the Fair Work info line, 13 13 94, free… you won’t have to wait long, and you’ll speak to a trained workplace advisor who can talk you through wages and conditions issues. They can also refer through to ATO and ASIC. We’ve got dedicated referral points, so people who work within the Ombudsman who one of their key duties is to liaise directly with ASIC and ATO in order to refer these matters. We’re taking it really seriously, but we need the community to tell us sometimes, because they are the early warning signs, if you like, because they will see it before we do.

    David : Yep… Can you write it off? [laughs]

    Michael : Write off?

    David : Yeah, what you’ve lost through a phoenix?

    Helen : If you’re a small business, you can… but if you’re like your mum…

    David : She can’t write it off! No…

    Helen : The customer who’s paid a deposit, and the business has gone bust, there’s nothing to write it off against. So you’re left empty handed.

    David : I reckon…

    Michael : Sometimes getting a tax deduction is not the answer when you’re struggling for business yourself…

    David : No, no… I totally agree…

    Tom : One of the things we always say at the Ombudsman is… It’s that transition… I’m just telling stories now… It’s that transition from small business to medium business that I think a lot of businesses find really hard. If you run a retail shop or a hairdresser or a panel beating firm, you’re pretty good at your trade, you’re pretty good at making networks and things like that… When you transition from being a small business to a medium business, you know the test can differ, I always say ‘if you can no longer buy all your employees a round at the pub, you’re probably not a small business anymore’, and when you’re getting to that point, you need specialist advisors… You need payroll, you need legal advice, you need HR…

    Michael : You need governance don’t you…

    Tom : …you need governance. And we see so often that businesses thriving at the actual interface with customer level, but the governance stuff can go wrong.

    David : You see that’s… I’ve never known anyone to say “I’m going to start a business because I love governance…!” You know…?

    Tom : That’s true…

    David : It’s because I love being a plumber, or hairdresser, or I love what I do…!

    Tom : Yep… And I think as regulators we have a responsibility as well. Is our red tape so strong that people deliberately avoid it because it’s more cost effective to avoid it? So I think we need to be proportionate in our response in general, not just of phoenixing, to make sure that we’re accessible and approachable. Because if we’re not, then we’re failing…

    David : And to use technology, apps, the help service that you have for small businesses is sensational, your free service… that’s the way to do it isn’t it…?

    Michael : And we are moving very much to MyGov, which is really trying to bring everything together. Exactly what Tom’s saying… and digital and maybe being eventually a ‘one stop shop’. So as a business person, you may lodge something once, and every other agency can use it. Or the one message can come to you, and through an email, through MyGov. So that’s where we’re heading at a Commonwealth level, and it will take a few years.

    David : Yep! Guys, I’ve loved this hour! I’ve learned a lot for my own business, and for my mum! There are the two extremes… So it’s been a terrific session. Thank you for joining us. Hopefully you picked up as many tips as I have for identifying and helping iron out illegal phoenix businesses – wherever they are. Big thanks to our panel, Brett, and Michael, and Helen and Tom, and hopefully you benefit from their expertise. We will catch you next time.

      Last modified: 21 May 2015QC 45211