Building Contractor Advisory Service Video

Transcript of video

Hi and welcome to the Insolvency Experts — I’m Steven Kugel.

In the previous episode, we discussed illegal Phoenix Transactions.

On 1 July 2010, understanding that certain industries lent themselves towards phoenix type of behavior, the government enacted law that provided a new power to the Australian Taxation office.

Again, a phoenix occurs when a company deliberately goes into liquidationto avoid tax, creditors and employee entitlements and then re-emerges as another corporate entity which runs essentially the same business as the one placed into liquidation.

Under New Legislation

Under the new legislation, the ATOcan now demand a “security deposit” for existing and future tax debts if it suspects the business or director involved may be a risk of becoming a phoenix – where, for example, a company’s director has had a poor record of paying tax bills in the past. The security deposits are uncapped, which means they are at the discretion of the ATO who can demand as much as they believe they need.In this way, by demanding a director put up a bond or guarantee, the ATO hopes to stop illegal Phoenix transactions from occurring.