The federal government has unveiled plans to establish a new phoenix hotline where businesses can report dishonest directors, but the move has been suggested as being little more than a PR stunt.
Minister for Revenue and Financial Services, Kelly O’Dwyer, announced the hotline – 1800 807 875 or via the ATO website – as a means of cracking down on the illegal phoenix activity, which she said “hurts hard-working Australians, including the company’s employees, suppliers, customers and competing businesses”.
“Last financial year the ATO sent out tax bills totalling more than $270 million from more than 340 reviews and audits of businesses involved in phoenix activity,” Ms O’Dwyer said.
“The new Phoenix Hotline will make it easier to report suspected phoenix behaviour directly to the Australian Taxation Office (ATO) so they can pursue those who are doing the wrong thing.
“It will enable timely action to be taken against companies and their directors, safeguarding employee entitlements like wages and superannuation, and ensuring taxes are collected for government to provide the essential services Australians rely on.”
However, Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, held little hope that the move would result in any meaningful change for SMEs.
“At the end of the day, a phoenix hotline will not protect unsecured creditors – small businesses – because they are at the bottom of the list of creditors when a company unscrupulously goes belly-up,” she said.
“A phoenix hotline will not directly support these small businesses and individuals.
“By the time action can be taken against companies and their directors, what little money is left will go directly to secured creditors, such as the ATO and the banks. And eligible employees will have their wages paid by Fair Entitlements Guarantee – a legislative safety net scheme to pay employees who lose their jobs due to the liquidation or bankruptcy of their employer.”
Instead, Ms Carnell petitioned for a statutory trust to be set up, similar to the one suggested by an inquiry into the building and construction sector.
“Money would be quarantined in a separate legislated account and would not be available for use by the company. It would be used to pay the people who did the work – the subcontractors,” she said.
“As we know, the construction industry has a track record of poor payment practices, insolvency and phoenixing, so statutory trusts will go some way to alleviate subcontractors and other small businesses not being paid as the result of phoenix activity.
“Let’s level the playing field for small businesses suffering at the hands of Australia’s phoenixing and provide some real protection for them, because it’s costing the small business sector a lot of money too.”
The move builds on the government’s previously announced measures to reduce the prevalence of phoenix activity, where businesses deliberately fold and relaunch under a new name in bid to escape paying their invoices and wage bills.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.