Illegal phoenix activity has a large impact on the Australian economy. According to reports in July 2018, phoenix companies caused a $5 billion loss to Australia – through unpaid trade creditors, unpaid entitlements to employees, and unpaid tax and compliance costs to the government.
What is phoenix activity?
Phoenix activity is when a new company is created to continue the business of an existing company which has been deliberately liquidated to avoid paying taxes.
As well as causing significant drain on the Australian economy, phoenix companies are a hindrance to the company’s employees, suppliers, customers and competing businesses.
How is this affecting tax monitoring?
The government are taking numerous steps to crack down on phoenix activity.
One of their recent actions has been developing the director penalty regime which makes directors personally liable for company debts.
There has also been the introduction of a new GST withholding regime for new residential property, which requires purchasers to directly remit GST to the ATO.
Avoiding phoenix companies
There are a few measures that can be taken to ensure you are not doing business with illegal phoenix companies. All it involves is some research.
Firstly, you can confirm that the business is registered and has a valid ABN. This can be searched for online. You can also source a company report from ASIC.
Secondly, you can use a search engine to research the company and its directors to discover if there are any concerning or adverse media reports.
If you do identify a phoenix company, you can call the Phoenix Hotline on 1800 807 875, or report them online.
