The Australian Tax Office has revealed it has collected more than $500 million from busting businesses that illegally re-birth themselves.
A “phoenix” is a business that winds up after getting into debts, then the same owners open a new company that continues on doing the same business but is free of the responsibilities to the creditors in the old entity.
Dodged debts can include wages owed to employees, as well as unpaid bills from suppliers and the tax office.
The practice is illegal as the business owner is leaving unpaid debts behind without any intention to repay, but previously the practice was notoriously difficult to stop or prosecute.
The Australian National Audit Office estimates that illegal phoenix activity costs Australia between $2.85 billion and $5.13 billion each year.
$500 million collected through audits
But the tax office announced on Friday that its special Phoenix Taskforce, established in November 2014, has managed to collect more than half-a-billion dollars through audits of alleged phoenixes.
“Illegal phoenix operators have a devastating impact on the community, including businesses, employees and contractors. It also means that state and federal governments can’t invest as much on initiatives that benefit all Australians,” said ATO deputy commission Will Day.
Construction, labour hire, payroll services and security are industries where phoenixing is seen more frequently than others, according to ATO. Mining, agriculture, horticulture and transport also see phoenixing in regional Australia.
The ATO’s taskforce has been specifically targeting intermediaries that facilitate illegal phoenix activities.
“We are also grateful when ordinary Australians help us identify phoenix operators for the benefit of all,” Day said.
“Investigation of illegal phoenix activity is complex and time consuming. Civil and criminal matters typically take many years to finalise.”
Property developer busted
In January, Sydney luxury real estate developer Benjamin Ensor was sentenced to six years’ jail and ordered to pay more than $1.8 million after he was caught phoenixing.
“It’s very rewarding for our teams to see a successful prosecution as we saw with the six-year jail term of Benjamin Ensor,” said Day.
“We have developed sophisticated data matching tools to identify, manage and monitor suspected illegal phoenix operators. We support businesses who want to do the right thing and will deal firmly with those who choose to engage in illegal phoenix behaviour.”
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