“Very rewarding”: Tax office recoups $500 million in revenue from phoenixing crackdown

The Australian Taxation Office (ATO) has retrieved more than $500 million in taxpayer funds thanks to a four-year-long crackdown on illegal phoenixing activity by Australian business owners.

Phoenix activity is when a new business is created to continue the operations of another liquidated business, which has usually been shut down to avoid paying debts or taxes. In 2014, the ATO and the Australian National Audit Office (ANAO) founded the Phoenix Taskforce to combat this illegal activity, which comprises of 34 federal, state and territory government agencies.

The ANAO has now released its report on the efficacy of the taskforce, finding it has been largely successful in both helping the ATO retrieve tax revenue from illegally phoenixed businesses, and also collaborating with other government entities to share information about potential phoenixing cases.

The released report also issues three recommendations, which:

• suggests the taskforce provide guidance and clarity to local and international intelligence groups that investigate phoenixing activity;
• recommends the taskforce further refine its operations; and
• includes future targets for tackling phoenix activity.

The ATO agreed with all three recommendations, with deputy commissioner Will Day welcoming the report.

“We see illegal phoenix activity all over the country in many industries and locations. Illegal phoenix operators have a devastating impact on the community, including businesses, employees and contractors,” he said in a statement.

“It also means that state and federal governments can’t invest as much on initiatives that benefit all Australians.”

The ATO estimates phoenix activity costs Australia between $2.85 billion and $5.13 billion each year, with it being most prevalent within construction, labour hire, payroll services and security services.

In the report, the Phoenix Taskforce stated it was commencing a top 16 Phoenix Target operation, intended to focus on the “most egregious cases of illegal phoenix activity”. The ATO says it has also broadened its data analytics tools to focus on phoenixing business owners and warned those who may be breaking the law.

“We have developed sophisticated data matching tools to identify, manage and monitor suspected illegal phoenix operators. We support businesses who want to do the right thing and will deal firmly with those who choose to engage in illegal phoenix behaviour,” Day said.

The deputy commissioner also referred to a recent case where a phoenixing property developer was sentenced to six years in jail and a $1.8 million fine, saying successful prosecutions of that level were “very rewarding”.

Business owners who may be worried another business or supplier they are working with is engaging in phoenix activity should look for some key warning signs, the ATO says.

This includes the directors requesting payment to another company, changes to the company’s name and directors, but not its staff, and if they’re offering quotes significantly lower than market value.

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