On 16 August 2018, the Minister for Revenue, the Hon. Kelly O’Dwyer MP released Exposure Draft legislation aimed at combatting illegal phoenixing activity. Phoenixing occurs when the controllers of a company strip a company’s assets and transfer them to another entity to avoid paying the company’s debts, which is estimated to cost the Australian economy between $2.85 billion and $5.13 billion annually.
The Exposure Draft implements four measures to combat illegal phoenixing that were originally announced in the 2018 Federal Budget:
- Schedule 1 introduces new offences to prohibit creditor-defeating dispositions of company property, penalise those who engage in or facilitate such dispositions, and allow liquidators and ASIC to recover such property
- Schedule 2 ensures directors are held accountable for misconduct by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors
- Schedule 3 allows the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances and
- Schedule 4 authorises the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information that may affect the amount the Commissioner refunds, ensuring taxpayers satisfy their tax obligations and pay outstanding amounts of tax before being entitled to a tax refund.
Submissions in response to the Exposure Draft are due on 27 September 2018.