Government agencies are working together through the Phoenix Taskforce to protect public revenue, businesses and employee entitlements by reducing illegal phoenix activity.
Illegal phoenix activity is when a new company is created to continue the business of an existing company that has been liquidated to avoid paying taxes, creditors and employee entitlements.
Illegal phoenix activity includes:
- non-payment of wages, superannuation and other entitlements
- getting an unfair competitive advantage over other businesses
- non-payment of suppliers
- loss of government revenue and increased monitoring and enforcement costs
- avoidance of regulatory obligations.
Illegal phoenix activity impacts the entire community as revenue lost could have contributed to hospitals, roads, education and other essential services. The Department of Jobs and Small Business is committed to reducing this activity and prosecuting offenders.
How is the Department of Jobs and Small Business addressing fraudulent phoenix behaviour?
The Department of Jobs and Small Business administers the Fair Entitlements Guarantee (FEG). FEG is a safety net scheme to provide assistance for certain employee entitlements after employees lose their job due to bankruptcy or liquidation of their employer. The information collected through the claim assessment process can provide useful intelligence about the corporate activities of employing entities. This data is routinely provided to the Phoenix Taskforce to form part of the sophisticated cross agency data matching undertaken to identify, monitor and manager suspected illegal phoenix operators.
The Fair Entitlements Guarantee Act 2012 provides the Department of Jobs and Small Business with statutory authority to share information collected in the claim assessment process with other Australian Government agencies. Where potential breaches of the law are identified during the FEG claim assessment process, the Department also refers such conduct to regulatory agencies.
How is the Department addressing other fraud against FEG?
The Department has a robust fraud and non-compliance regime in place under the Fair Entitlements Guarantee to deter, detect and respond to any attempts to defraud or exploit the program.
The Department expects all persons making FEG claims or supporting the Department’s verification of claims to act honestly. The Department will not tolerate dishonesty or fraud in connection with FEG. Such behaviours undermine the objectives of the programme as a taxpayer funded safety net scheme of last resort. FEG is intended only for those employees who meet the FEG eligibility requirements due to being genuinely affected by termination of employment due to insolvency.
The Department demonstrated its willingness to pursue criminal prosecution after anomalies were detected in connection with payments made under the General Employee Entitlements and Redundancy Scheme, the predecessor to FEG.
The charges arose in relation to the lodgement of sixteen fraudulent claims, one of which resulted in a payment of $27,404. The parties were convicted of colluding to provide information to the Department to mislead the Department about the veracity of the claim.
In that case:
- The operator of the ‘insolvent business’ and another party linked to the fraud were convicted after entering pleas of guilty to charges relating to collusion with the liquidator.
- The business operator was sentenced to a total of 16 months imprisonment (suspended) and the associate was sentenced to 12 months imprisonment (suspended) and ordered to repay $27,404.
- The liquidator of the company was convicted in June 2017 after a trial. The liquidator was convicted of one charge of obtaining a benefit by deception and sentenced to 15 months imprisonment (suspended).
Want to know more?
- If you suspect an illegal phoenix operator, report your concern to the Australian Taxation Office. For more information, visit Illegal phoenix activity.
- Information on how to make a complaint to the Australian Securities and Investments Commission (ASIC) is available on the report misconduct section of the ASIC website.