There is currently legislation before the Australian parliament to extend the ATO’s power to enable it to make an estimate for GST, luxury car tax or wine equalisation tax in circumstances where the ATO believes a company is engaged in illegal phoenixing activity. The AICD supports action being taken to stamp out illegal phoenixing activity and deplores practice where directors abuse the corporate veil for personal benefit. However in our view, it is inappropriate, without a compelling justification, to expand personal liability for all directors rather than targeting those criminals and companies engaged in misconduct.

The ATO has issued a draft Practical Compliance Guideline on how it might apply its powers if the parliament passes the Bill. The AICD continues to express its reservations on the Bill and to make representations to government to that effect; however we made a submission to the ATO in the event the Bill passes in its unamended form. We argued that the Guideline should tighten the scope of matters which the ATO considers evidence phoenix activity so as not to cast the net too wide. We made suggestions as to further steps that the ATO could take to contact directors in the event they had suspicions about phoenix activity. We also requested that the Guidance refer specifically to safe harbour provisions where directors are taking a course of action that is reasonably likely to lead to a better outcome for a company that may become or be insolvent.

You can read our submission here.