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10-year ban for liquidator sets new precedent

Federal Court of Australia

A Federal Court ruling has set a new precedent for the ATO to tackle phoenix behaviour, with a liquidator given a 10-year ban from practising for systemic negligence across at least 23 companies.

The ATO said in a statement that it was the first time it had launched action in the Federal Court using the Corporations Act to take on the facilitators of tax evasion schemes.

On Thursday, the Court found Sydney man David Iannuzzi had engaged in “systemic conduct [that] was certainly reckless; it fell very far short of the conduct that was to be expected of him; it demonstrates that he failed to observe the obligations of candour on him with regard to disclosing relevant circumstances to creditors; it reflects poorly on his character; and it demonstrates that he is not a fit and proper person to remain registered as a liquidator”, the Tax Office noted.

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The ATO said that as the sole director of Veritas Advisory Pty Limited, Mr Iannuzzi had “been systemically negligent in his responsibilities as a liquidator over an extended period of time and across more than 23 companies”.

In addition to the 10-year ban on acting as a liquidator, Mr Iannuzzi was also ordered to pay the ATO's costs.

The full verdict can be found on the Federal Court website.

Assistant commissioner Aislinn Walwyn said the outcome was a boost for the ATO in cracking down on illegal phoenix activity and removing those who engage in such conduct from the business market.

Phoenix activity, she noted, involves the deliberate winding up or abandonment of a company to avoid paying its creditors, with its assets transferred to a new entity which continues trading, often under a similar name.

“Our taxation and superannuation systems rely on the integrity of industry professionals, including insolvency practitioners,” Ms Walwyn said.

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“Illegal phoenix activity affects the whole community. It rips off creditors and employees and reduces the amount of revenue that could be collected to fund essential community services.”

The ATO pointed to a 2018 report by accounting giant PwC, which estimated the economic impact of phoenix activity to be as high as $5.13 billion annually in Australia.

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10-year ban for liquidator sets new precedent
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