Feds gearing up to take on fraudsters behind dodgy reboots ‘Phoenixing’ crackdown

FRAUDSTER small business bosses, accountants and lawyers are being dobbed in at a rate of two a day for alleged illegal phoenixing of businesses, in co-ordinated scams that in the past financial year cost taxpayers up to $5 billion.

The sectors have been put on notice a small army of financial cops including from the Australian Federal Police and Australian Taxation Office are upping their targeting of their work to stamp out illegal phoenix activity that has risen alarmingly in recent years.

Phoenixing is a practice whereby a company is deliberately liquidated to avoid paying tax, debts, creditors or worker entitlements only to be reborn under a new name and structure to keep operating.

According to new ATO figures, a hotline set up in July 2018 to encourage people to dob in illegal phoenix activity had received hundreds of tipoffs that in the past 12 months had led to more than 740 investigation referrals.

“This includes about 100 email tip-offs and more than 650 phone calls,” the ATO found.

“In addition, the Serious Financial Crime Taskforce is stepping up its focus on illegal phoenix activity and is currently dealing with eight criminal referrals.

“The annual direct impact of illegal phoenix activity is estimated to cost the Australian community between $2.85 billion and $5.13 billion.”

Improved sophisticated data matching tools shared now between Commonwealth and state agencies were also exposing dodgy operators.

The AFP’S Fraud and AntiCorruption Centre, staffed by 17 Commonwealth agencies including the ATO, Austrac, ASIC and the Attorney-general’s Department, found some liquidators and pre-insolvency operators were working with lawyers to actually target companies to assist them facilitate frauds like phoenixing.

“Facilitators can be a oneman show or a company they work for and can take up to 10 years to go through the courts and secure convictions,” AFP’S Fraud and Anti-corruption’s detective Acting Superintendent Simone O’mahony said.

“They have produced wellfunded defence teams, have used every legal injunction they can possibly use, we come across some of the best barristers so we have to get investigators to not only get their heads around how these complex structures work but who can build cases to be picked apart by some of the best barristers in the country and actually stand up to a criminal level of proof.” Supt O’mahony said phoenixing had existed for “decades and decades”.

“It is absolutely still used as a technique that we regularly see, one of the things with phoenixing is that it is not unlawful to actually liquidate your company because you have gone bankrupt, you declare bankruptcy and liquidate your company,” she said.

“It’s then when you start up a new company and continue (business) so get rid of those debts.”