Government Approved crackdown on Phoenix Activity reported
Illegal phoenix activity has been thrust into the spotlight with the Australian Government’s recent report “The Economic Impacts of Potential illegal Phoenix Activity”.
This document revealed that the annual direct impact of illegal “phoenixing” is between $2.85 billion and $5.13 billion.
For those who may not be familiar with the details of illegal phoenix activity, it occurs when a company liquidates itself to avoid paying employee entitlements, taxes and creditors.
Like the Phoenix, the company then rises from the ashes to operate as a “different” business (although the business remains predominantly exactly the same).
The company continues this cycle, undercutting other legitimate businesses and burning employees, the tax-payer and creditors.
While phoenix activity can operate in various industries, it is mostly confined to the construction and labour hire industries.
As discussed in The Financial Review, Revenue and Financial Services Minister, Kelly O-Dwyer, is leading the crackdown on the harmful behaviour through launching a website and hotline where “phoenixes” can be reported directly to the ATO.
This comes as a victory for all Australian hard-working construction businesses and employees. Phoenix activity is synonymous with grossly underpaying employees as well as undercutting genuine businesses with project quotes that are unable to be competed against.
Warning signs of phoenix activity to watch for:
- Changes in the company’s name or ABN, but the address or phone number remains the same
- Your employee entitlements (Superannuation etc.) are not being paid
- If your pay is less than minimum wage, below the amount you were told it would be or if it often comes late
- If the employer name on your payslip is different to who you believe you work for
- If you don’t receive payslips at all
You can report illegal phoenix activity to the Australian government by:
Calling the hotline on 1800 807 875
Or you can report online here.
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Written by Amelia Fynes-Clinton for Globe Group.
 Australian Government Taxation Office, How much does illegal phoenix activity cost the community?, Australian Government, July 2018, <https://www.ato.gov.au/Business/Large-business/In-detail/Business-bulletins/Articles/How-much-does-illegal-phoenix-activity-cost-the-community-/>, viewed 9 August 2018.  A Tillett, ‘Rising cost of phoenixing delivers $5 billion economic hit, Kelly O’Dwyer says’, The Australian Financial Review, 16 July 2018, available from https://www.afr.com/news/rising-cost-of-phoenixing-delivers-5-billion-economic-hit-kelly-odwyer-says-20180715-h12pic, viewed 10 August 2018.