Legal

Business owner jailed for five years over illegal phoenix activity

Matthew Elmas /

A West Australian business owner has been sentenced to five years in jail for engaging in illegal phoenix activity in a ruling the tax office says underscores the seriousness of the crime.

The businessman was sentenced in the District Court of Western Australia last week, ordered to pay back $890,000 in fraudulently obtained money.

The man was convicted of 20 charges related to his labour-hire business, which was operated between four separate companies between 1997 and 2009.

The Australian Taxation Office (ATO) alleged he intentionally accumulated debt, liquidated his business to avoid paying the bill and then set up operation through a different corporate entity.

Assistant commissioner Aislinn Walwyn said the case is a “strong reminder” phoenix operators will be caught.

“This kind of behaviour has an incredibly damaging impact on the Australian community through unpaid wages to employees, debts to other businesses, and unpaid taxes,” Walwyn said in a statement.

“Companies like these are obtaining financial advantages over their competitors and robbing the Australian economy of revenue that could be spent on essential services.”

Phoenixing under the spotlight

The ruling comes amid mounting scrutiny over phoenixing operations and its effect on the Australian economy, both among regulators and in Canberra.

It is estimated phoenixing costs the country between $1.8 billion and $3.2 billion each year.

Both Labor and the Coalition are trying to crack down on the practice through a suite of new policies.

New laws are being considered by the Senate at the moment which would increase the penalties for those that skip out on employees in the event of insolvency.

The Fair Work Ombudsman and the ATO will be given new powers to pursue directors under those laws.

Treasury is also conducting consultation on a policy that would require directors to sign up for unique identification numbers, which would help regulators track their activity.

Labor unveiled a new policy earlier this month that would see directors named and shamed for illegal phoenixing activity.

NOW READ: Government says yes to company director ID numbers: What small businesses need to know

NOW READ: A plan to introduce ID numbers for company directors could be in the works

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Matthew Elmas

Matthew is the news editor at SmartCompany.

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