Cycle ends in jail time for illegal phoenix operators
Three men have today been sentenced to jail for conspiring to defraud the Commonwealth of $4,632,355, following the orchestration of an elaborate illegal phoenix operation. Seng Leng Heng, was sentenced to 8 years' imprisonment as the 'instigator and architect of the scheme'. Nathan Sarinn, and Nay Chy were sentenced to 4 and 5 years' imprisonment respectively for their roles in the scheme. A reparation order was also imposed requiring the trio to pay back the full amount.
Mr Heng, Mr Sarinn, and Mr Chy established multiple labour hire companies to provide workers to vineyards, fruit and vegetable growers, and meat processers around South Australia and in Queensland. The companies failed to remit both Goods and Services Tax (GST) and Pay as You Go (PAYG) withholding to the ATO, despite charging their clients GST and including figures supposedly withheld for PAYG on employee payslips.
Significant debts for the entities were raised following audits, however, because the men were withdrawing funds from the respective entities’ accounts on a frequent basis, there were insufficient funds at the time of liquidation to enable the recovery of the outstanding tax debts. Over a 25-month period, across all six entities, $23,131,414 was withdrawn in cash by the offenders.
In some instances, there was some overlap in the operation of the entities, but in most cases, they would cease operating an entity and move on to another, beginning the cycle again.
Assistant Commissioner Ian Read welcomed the sentence handed down today.
“This type of behaviour is blatant fraud against the Commonwealth, and we will not tolerate it. Phoenixing is an intentional act that requires planning and the alleged behaviour in this case demonstrates a deliberate attempt to defraud the tax and super system,” Mr Read said.
The trio attempted to hide their illegal activities by appointing shadow directors for the companies, exploiting their relationship with employees or acquaintances living in Australia, at least three of whom were on student visas.
“Today’s result demonstrates the ATO’s commitment to detecting and prosecuting tax crimes. We take our responsibility to protect the tax and super systems seriously,” Mr Read said.
The ATO-led Phoenix Taskforce takes a whole-of-government approach to combating illegal phoenix activity. Established in 2014, the taskforce includes 38 other Federal, State and Territory government agencies, including the Australian Securities and Investments Commission, Attorney-General’s Department, the Fair Work Ombudsman and Australian Border Force.
Chair of the Phoenix Taskforce Will Day said illegal phoenix activity is an economy-wide issue that costs the Australian community billions of dollars every year, impacting businesses, employees and government.
“Tax crime is not victimless. Illegal phoenix operators gain an unfair advantage by never intending to meet their financial or tax obligations, not only disadvantaging honest businesses, but the whole Australian community who do the right thing.
“The taskforce aims to disrupt the business model of phoenix operators, bring them back into the system, or remove them from the business environment and penalise them, Mr Day said.
“The ATO’s ability to identify and quickly crack down on this type of phoenix activity will be dramatically enhanced by the introduction of Director Identification Numbers, which will be required for all new directors from 1 November,” Mr Day said.
Illegal phoenix activity occurs when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements. This behaviour can be repeated many times. Since the taskforce was established in 2014 to 30 June 2021, the ATO has raised more than $1.54 billion in liabilities from audits and reviews of illegal phoenix activities. It's also returned more than $687 million to the community.
If you know or suspect illegal phoenix activity, report it to us by:
For more information on how to recognise a dodgy scheme visit www.ato.gov.au/phoenix
This matter was prosecuted by the Commonwealth Director of Public Prosecutions.
Three men have today been sentenced to jail for conspiring to defraud the Commonwealth $4,632,355 following the orchestration of an elaborate illegal phoenix operation. Last modified: 09 Sep 2021QC 66762