Govt moves to penalise directors of ‘phoenix’ companies

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Govt moves to penalise directors of ‘phoenix’ companies

The Federal Government is moving to deter ‘phoenix’ companies by making directors personally liable for unpaid superannuation and PAYG tax.

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The Federal Government is moving to deter ‘phoenix’ companies by making directors personally liable for unpaid superannuation and Pay As You Go (PAYG) tax.

‘Phoenix’ companies are put into liquidation by their directors when owing wages and superannuation to their employees, and payments to suppliers and contractors, and then re-emerging to restart business under a new, usually similar, name.

Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, last week introduced legislation into Parliament to try to stop this practice.

Fraudulent
 
‘Fraudulent phoenix activity hurts all sectors of the economy, including workers, creditors, customers, competing businesses and Government,’ Shorten said.

‘It creates competitive disadvantages for businesses who do the right thing and means payments of workers’ entitlements are often neglected.’

Shorten said the legislation will:
  • extend the director penalty regime to make directors personally liable for their company’s failure to pay employees’ superannuation guarantee amounts
  • allow the Australian Taxation Office to pursue directors under the director penalty regime without issuing a director penalty notice where the company’s unpaid PAYG withholding or superannuation guarantee liability remains unpaid and unreported three months after the due day
  • deny directors (and their associates) entitlement to PAYG withholding credits (through the imposition of tax) where the company of which they are a director has failed to remit PAYG withholding amounts.
Shorten said the amendments balance the importance of ensuring employees receive their entitlements and deterring phoenix activity, against the need to ensure entrepreneurialism and commercial risk taking is not discouraged.

The ATO estimates there are approximately 6000 phoenix companies in Australia. This equates to approximately 7500–9000 company directors who will have personal liabilities under the legislation.
 
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