In brief

A labour hire business operator who fraudulently obtained more than $890,000 through illegal phoenix activity (involving business debts, GST and PAYG obligations) has been jailed for five years and four months and ordered to repay the money.

The operator, located in Western Australia, provided contract welders to engineering construction companies in and around Perth. Over two decades, the operator engaged in ‘phoenixing’ by liquidating four different corporate entities to avoid paying his businesses’ debts, GST and PAYG obligations.

Broadly, the operator’s business was considered to have displayed the hallmarks of illegal activity as the operator:

  • carried on a business through one corporate entity which intentionally accumulated but did not repay debts;
  • liquidated the business to avoid paying the debt;
  • continued the business through a different corporate entity, which was still under his control; and
  • failed to report and remit GST and PAYG withholding whilst having full control of the relevant entities.

Phoenix activity is estimated to cost the Australian economy more than $3 billion a year.

Reforms to anti-phoenixing measures were announced in the 2018/19 Budget, including proposed changes to the Director Penalty Notice scheme for GST compliance.