Directors concerned over innocent casualties in budget crackdown on phoenix schemes

Business groups are concerned new measures contained in the budget designed to crack down on directors involved in phoenix schemes may actually catch directors who aren’t involved in such activities.

The Australian Institute of Company Directors has said while it is supportive of any new move to catch the perpetrators of phoenix schemes, it also believes the Australian Taxation Office should not necessarily assume the worst.

“We’re strongly supportive of any move to crack down on directors of phoenix schemes,” AICD spokesman Steve Burrell says. “But our concerns are around the way in which these laws are framed.”

“They have at least the potential to catch in the net those people who aren’t necessarily engaged in those activities.”

Along with the ACID, the Insolvency Practitioners Association of Australia also made a submission to the Government in 2009 regarding these types of laws, saying the current provisions would be suitable.

This morning SmartCompany contacted the IPAA, which said it is still reviewing the budget and is not yet prepared to make a statement on the new laws.

The ATO will be given $146 million over the next four years to deal with different types of frauds, with phoenix schemes one particular area of interest.

New laws will expand the director penalty regime, and directors personally liable for failing to pay superannuation to employees.

The ATO can also start recovery processes against directors under the penalty regime without the need for a 21-day grace period for liabilities left unreported for three months after they are due.

Burrell says these initiatives are good, but is concerned directors innocent of being engaged in phoenix activities may be assumed to be if they are caught out by these laws.

“There is a concern of course the existing provisions are good and deal with this issue, and that this is an additional piece of legislation which wasn’t necessarily required.”

“We are in no way attempting to say this isn’t a problem. But the extension of the penalty regime seems to suggest that you’re being assumed to be acting in such a way, if you’re caught by the new laws.”

There are some new provisions as well, which relate to how the ATO can withhold tax payments if a director has not paid debts – but Burrell says the new phoenix arrangements are the most concerning.

“In a sense, you do need to have a red flag of some sort so you can determine what type of activity is going on. But these provisions seem to take certain types of activities as indicative of this sort of activity.”

“It’s possible for various other reasons that this isn’t the case.”