A Sydney man will spend six years in jail and pay $1.8 million in reparations after being convicted of tax fraud related to illegal phoenixing activity in the NSW District Court last week.
The man was found to have lodged false Business Activity Statements (BAS) on behalf of nine companies he was sole director of between 2008 and 2011, defrauding the Commonwealth of $3.4 million.
The proceeds were used to purchase luxury goods, including a marina at Lake Macquarie, a catamaran and to pay for the development of five luxury apartments in Manly.
The Court heard the man structured his companies to obtain GST credits fraudulently, reporting his business expenditure at more than $24 million and claiming over $2.2 million in GST refunds.
The Australian Taxation Office (ATO), which investigated the businessman, claimed false invoices were created for the purchase of high-value items and project management services.
In a statement, ATO assistant commissioner Aislinn Walwyn said the case demonstrated the tax office’s commitment to detecting and prosecuting phoenixing, an issue which has been estimated to cost the Australian economy billions each year.
“This case exhibits classic illegal phoenix behaviour. Companies were deliberately liquidated to avoid paying creditors and taxes. New companies continued operating the same or a similar business with the same ownership,” she said.
The conviction is a major scalp for the phoenixing taskforce, which consists of the ATO, ASIC, Fair Work Ombudsman (FWO) and the Department of Jobs and Small Business.
Efforts to combat phoenixing have been stepping up in recent years, with both major political parties making commitments to crack down on black economy activity.
Assistant Treasurer Stuart Robert said laws passed by the government last July were making it more difficult for fraudsters in the residential and construction industries.
Good work in court today by ATO and @AusFedPolice against developer involved in phoenixing.
Court sentenced this GST fraudster to 6 years.
Coalitions’s new law from July 2018 makes GST fraud & phoenixing in residential construction much harder.
— Stuart Robert MP (@stuartrobertmp) 25 January 2019
The conviction precedes the implementation of director identification numbers, which will help crack down on phoenixing by tracking directors past individual companies.
The policy has bipartisan support and is expected to pass parliament at some stage in 2019.