The ATO have released a statement that the Phoenix Taskforce is currently targeting illegal phoenix businesses within the agriculture, forestry and fishing industries.
The intention behind the taskforce is to stop the illegal activities and protect honest workers and businesses.
Illegal phoenix activity is when a company is deliberately liquidated so they can avoid paying their debt. This debt often includes creditors, tax’s and unfortunately employee entitlements including superannuation. The business then starts a new company, with a clean slate. Most times the business name is the same or very similar.
Particularly within the agricultural industry, this behavior is prevalent among labour hire firms. The practice is harming honest contractors, ripping off workers and leaving a trail of debts behind them.
If you engage a Phoenix business, then you could be liable for outstanding debts and potentially face criminal charges.
Therefore, it’s in your best interest to be on the lookout for illegal phoenix activity. Here are some warning signs to consider:
- If you are asked to pay into a different bank account
- If you are dealing with the ‘same company’ as previously but they now have a modified trading name or using a new ABN
- If they are behind on their tax and super lodgments (you can ask them for proof their company is compliant)
- If they are quoting too low
- If the person running the company is not the director (it might be a family member or partner instead)
- If the directors have been associated with liquidations or de-registrations previously (A quick search on ASIC or Google should be able to tell you this)
To protect yourself and your business, keep the industry safe and honest be aware of illegal phoenix operators.
The ATO have provided the following case study
A banana grower from Northern Queensland relies on labour hire company, “Staff4You”, to provide him with seasonal staff to assist in peak periods. Recently Staff4You changed its name to “Staff For You”, but as the director remained the same and the price was extremely competitive, the grower was happy to continue using them.
The grower soon notices a number of his contracted staff complaining about their salary being lower than expected and that their superannuation has not been paid. Not long later, the grower receives a garnishee notice from the ATO relating to payments made to the labour hire company and discovers that Staff For You has not been paying the staff correctly and has not paid employee withholding tax to the ATO.
The grower could now be held liable for the labour hire company’s debts, and face criminal sanctions that include:
– Fines of up to $63,000 per breach and liability for shortfalls in employee entitlements where contract workers employed by Staff For You (the phoenix labour hire operator) are underpaid in the grower’s workplace, and
– Liability for allowing foreign workers who do not hold a visa or who are working in breach of their visa conditions (even if the person was sourced from a referral agent, labour supply company, contractor or subcontractor providing the services). This can include fines up to $63,000 for serious criminal offences and five years’ imprisonment for individuals and $315,000 for body corporate; all fines are per illegal worker.
The grower is concerned about the potential consequences to him so he reports Staff For You to the ATO to investigate.