Combating Illegal Phoenixing – by Personal Liability for GST

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Reference: https://australianinsolvencylaw.com/2019/07/22/the-combatting-illegal-phoenixing-bill-2019/

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was reintroduced into Federal Parliament on 4 July 2019.

According to the Explanatory Memorandum, the intended laws will:

  1. introduce new phoenixing offences that;

a) prohibit creditor-defeating dispositions of company property,

b) penalise those who engage in or facilitate such dispositions (directors, officers, facilitating advisers),

c) allow liquidators and ASIC new recovery options.

2. ensure directors are held accountable for misconduct by preventing improper backdating of resignations or ceasing to be a director when this would leave the company with no directors.

3. allow the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances.

4. authorise the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount the Commissioner refunds so as to ensure taxpayers satisfy their tax obligations and pay outstanding amounts of tax before being entitled to a tax refund.

While Illegal Phoenixing and the rise of unscrupulous pre-insolvency advisers and facilitators who promote such behaviour warrants strengthened Insolvency Laws, the Bill vastly increases the ATO’s powers  and this will affect all Australian businesses.

Specifically, point 3 will result in the most significant increase in the ATO’s recovery powers in over 25 years.

The Bill expands the Director Penalty Regime to include personal liability for unpaid GST, not just PAYG or super.

Of course, a director that causes their company to correctly report its liability within the 3 month window will still be able to have the Director Penalty remitted by paying or entering insolvency within 21 days of receiving a Director Penalty Notice.

The proposed law has been slammed as “shocking”, “unfair” and a “vicious attack” on the business community