Whilst business is encouraged by giving some protection via the limited liability of a company, that is being seen as fraudulent if “phoenix” activity is included.

Such activities involve the deliberate liquidation of a company to avoid paying tax liabilities and employee superannuation.  The business then “rises” again and continues operations controlled by the same person, but under another corporate entity and free of debts.  

The tax law changes include making directors personally liable for unpaid employee superannuation, and allowing the Australian Taxation Office (ATO) to pursue directors where certain tax debts remain unpaid and unreported three months after the due day.

Directors need to ensure that their company’s tax risk management policies and systems are up-to-date.  The ATO, as part of its Compliance Program for this year, aims to detect potential phoenix activities sooner through a targeted program of reviews and audits of directors.  This seems wishful thinking, but if seriously actioned can only mean more and more compliance obligations when business is already being slowly chocked by compliance requirements.