ASIC and ATO engage with directors as part of ASIC’s Phoenix Surveillance Campaign

Between 1 July 2020 to 30 June 2021, ASIC and the ATO conducted 21 joint engagement consultations with directors of selected companies.

These engagements form part of ASIC’s Phoenix Surveillance Campaign, which aims to proactively deter and prevent company directors from engaging in illegal phoenix activity. ASIC, in collaboration with the ATO, engage with company directors to remind them of their director duties, discuss their taxation obligations, and encourage them to seek professional and reputable business advice early if they are experiencing financial distress.

After engaging with the directors, 80% of all outstanding ATO returns were lodged and evidence suggests that the program has had a positive impact on directors behaviour.

Illegal phoenix activity has economy-wide implications. It is estimated by the Phoenix Taskforce that the economic impact of illegal phoenix activity is more than $5 billion annually.

Illegal phoenix activity can result in employees not being paid their wages or other entitlements, such as superannuation and leave. It can result in suppliers and sub-contractors that provide goods or services not being paid. It also places other businesses that operate lawfully at a severe competitive disadvantages when competing for work. Directors that engage in illegal phoenix activity often avoid paying tax which can deny the community of revenue that is used to fund public services such as hospitals, education and other essential services.

The Phoenix Surveillance Campaign was first implemented by ASIC in the 2013-14 financial year, with the ATO joining in the 2019-20 financial year. As part of the campaign, ASIC and the ATO share intelligence and undertake surveillance on directors that may be at risk of engaging in illegal phoenix activity.

Background

ASIC and the ATO are members of the Phoenix Taskforce, along with 40 other Federal, State and Territory government agencies, including the Attorney-General’s Department, the Fair Work Ombudsman and Australian Border Force. The taskforce takes a whole-of-government approach to combating illegal phoenix activity.

Illegal phoenix activity occurs when a new company is created to continue the business of a company that has been deliberately liquidated, wound up or abandoned to avoid paying its debts, including taxes, creditors, and employee entitlements. This behaviour can be repeated many times.

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