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  • Public examinations to identify phoenix activity commence

    Public examinations commenced in the Federal Court today in relation to a group of entities connected to pre-insolvency advisor Philip Whiteman. The examinations will look at the suspected promotion and facilitation of phoenix activities and tax schemes.

    Deputy Commissioner Will Day confirmed that more than 45 service providers, clients and employees of these advisors, and alleged ‘dummy directors’ of phoenix companies, will be examined. The ATO has funded court appointed liquidators, Pitcher Partners, to investigate the affairs and conduct of these entities before any further legal action by the Commonwealth is considered.

    “While we can’t comment on the details of specific matters before the courts, this is a timely reminder of the human impact of illegal phoenix activity,” Mr Day said.

    “Illegal phoenix activity deprives employees of their hard earned wages and superannuation entitlements, unfairly disadvantages honest businesses by undercutting prices and leaves suppliers with unpaid debts.”

    By not paying the right amount of tax, these phoenix operators also rob the community of missing revenue.

    According to our most recent estimate, illegal phoenix activity costs businesses, employees and the government up to $5.13  billion per year.

    “Combatting illegal phoenix behaviour is a high priority for the ATO,” Mr Day said.

    “Our focus is on detecting those who promote and facilitate illegal phoenix behaviour, and disrupting those who willingly engage in phoenixing.

    “We pursue those who try to gain an unfair advantage by avoiding their tax obligations, to protect the majority of business operators and directors who do the right thing.”

    We recognise legitimate businesses do experience times of financial stress, and we offer support and education through business recovery activities.

    Our concern is with illegal phoenix activity where a company is deliberately liquidated to avoid paying creditors, taxes and employee entitlements. The phoenix operators transfer the assets to a new entity, and continue operating the same or a similar business under the same effective ownership.

    Common warning signs of illegal phoenix activity include:

    • unpaid superannuation or other employee entitlements
    • unpaid invoices
    • unrealistically low quotes which undercut other contractors
    • overnight a new company is being used to carry on the same business as a former company in the same business premises and with the same phone number.

    The ATO is one of 31 Federal, State and Territory government agencies working together as part of the Phoenix Taskforce to combat illegal phoenix activity.

    In 2017–18 the Phoenix Taskforce conducted more than 340 reviews and audits of businesses suspected of engaging in illegal phoenix behaviour and sent out tax bills totalling more than $270 million. In that time more than $190 million in cash was also collected and returned to the community.

    To report suspected phoenix activity visit, ato.gov.au/reportphoenix or call the phoenix hotline on 1800 807 875.

    For more information on phoenix activity and the work of the Phoenix Taskforce, visit ato.gov.au/phoenix

    To read more about the Federal Court proceedings visit their websiteExternal Link.

    Last modified: 27 Aug 2018QC 56686