In a big 24 hours for restructuring and insolvency, the safe harbour reforms were passed by the Senate late last night, and anti-phoenixing reforms were announced this morning.
Safe harbour reforms
The safe harbour laws will commence operation the day after the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 receives Royal Assent, with the ipso facto provisions set to commence on 1 July 2018 (or earlier by proclamation).
The only amendment to the safe harbour proposed legislation which was accepted provides that there be an independent review to be undertaken after two years of operation of the impact of the availability of the safe harbour on directors of companies, their conduct, and the interests of creditors and employees of those companies.
The Government proposed some technical amendments to the ipso facto provisions, which were also accepted.
These amendments mean that the Bill must be approved again by the House of Representatives, but we expect this to be done this week, with Royal Assent to follow soon.
Key takeout: Get guidance on how safe harbour reforms could affect your business, and review any long-term supply contracts.
Anti-phoenixing reforms for consultation
Tougher penalties and counter-measures such as a Director Identification Number are the heart of anti-phoenixing reforms to deter and disrupt the core behaviours of phoenix operators, including non-directors such as facilitators and advisers, announced this morning by the Assistant Treasurer Kelly O'Dwyer.
The Government’s package of reforms will include:
- the introduction of a Director Identification Number (DIN) which will interface with other government agencies and databases so that regulators can map the relationships between individuals, entities and other people;
- specific phoenixing offences;
- a dedicated phoenix hotline for reporting illegal phoenix activity;
- the penalties that apply to those who promote tax avoidance schemes to be extended to capture advisers who assist phoenix operators;
- stronger powers for the ATO to recover a security deposit from suspected phoenix operators to cover any outstanding tax liabilities;
- making directors personally liable for GST liabilities as part of extended director penalty provisions;
- preventing directors from backdating their resignations to avoid personal liability or from resigning and leaving a company with no directors; and
- prohibiting related entities to the phoenix operator from appointing a liquidator.
A consultation period will begin soon.
Key takeout: Watch for further information on the consultation period, and consider making a submission.