New laws in flight to combat the rise of the phoenix

The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) is in full flight, which has put in place key changes aimed at enhancing disruption of phoenix activity and powers to prosecute Directors and other professional advisors who engage in or facilitate phoenix activity.

What are the key changes?

The key changes introduced are as follows:

1. New phoenix offences and civil penalty provisions to stop ‘creditor defeating dispositions’ of company property, and to penalise those who engage in or facilitate such dispositions. An example of a creditor defeating disposition would be a transfer of a company’s asset for less than market value, and that transfer prevents the asset from becoming available for creditors in the winding up of the company.
2. Liquidators and ASIC are empowered to recover property the subject of a creditor defeating disposition.
3. Directors are prevented from improperly backdating directorship resignations or ceasing to be a Director when this would leave the company with no Directors.
4. Directors are personally liable for the company’s GST liabilities. The ATO is entitled to collect estimates of anticipated GST liabilities and recover directly from Directors including issuing Director penalty notices. This is similar to the Director penalty regime for PAYG and superannuation.
5. The ATO is entitled to retain tax refunds where there are outstanding tax lodgements.

When did the changes take effect?

The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) assented 17 February 2020.

The changes at points 1 to 3 above came into operation on 18 February 2020.

The changes at points 4 and 5 above came into operation on 1 April 2020.

Going forward
 
These are welcomed changes in the fight against illegal phoenix activity.
 
Time will tell what the full impact will be.
 
The current pandemic crisis, where so many businesses have been impacted and are experiencing distress, and beyond may just present the perfect landscape to see these changes in action.
 
The team here at Hicksons are on deck and ready to provide expert support on the changes and issues.
 
Post by Marc Rossi.