Each n company director will be assigned a unique identification number under tough new laws designed to prevent them deliberately scuttling their companies to avoid paying creditors and then re-appearing phoenix-like, debt-free.
The crackdown, approved by cabinet on Monday, will be announced by Financial Services and Revenue Minister Kelly O’Dwyer on Tuesday.
The Directors Identity Number will enable directors to be tracked through other government agencies and databases in order to map their relationships to other companies and other people.
So-called phoenix activity is believed to cost as much as $3.2 billion per year, leaving workers, creditors and the Tax Office unpaid while directors repeatedly establish new near-identical companies without penalty.
The n Securities and Investments Commission has identified 11,500 potential phoenix operations. The Tax Office has told a Senate inquiry that as many as 20,000 companies may be building their wealth through “fraudulent phoenix behaviours”.
It believes it is owed $1.8 billion.The new laws will also target advisers to phoenix companies and will include specific offences to make prosecution easier.
Suspected phoenix operators will be required to hand the Tax Office a security deposit before establishing new companies that can be used to recover taxation debts, should they arise. The office will also be able to withhold refunds from companies whose directors have a record of past phoenix activity.
It will be able to commence immediate recovery action for following the issuance of Director Penalty Notice. Directors will be unable to backdate resignations and will be unable to resign where it leaves a company with no directors.
Suspected phoenix operators will also be personally liable for GST debts.
Related entities will be prohibited from appointing a liquidator to companies whose directors have a history of phoenix activity.
The ID requirement was promised by Labor in May along with a 100-point identification check on intending directors.
Labor’s Andrew Leigh said then that it was easier to become a company director than it is to open a bank account. Applicants did not need to prove their identity or provide a record of their corporate history, allowing unscrupulous directors to register a number of companies using different versions of the same name.
Ms O’Dwyer said the government’s package was much broader than Labor’s and went well beyond identification.
The Tax Office would also be given the resources and the laws needed to pursue directors. She would consult on the form of identification that would be required.
“We are committed to ensuring individuals who engage in illegal phoenixing activity are held to account,”: she said. “We will equip regulators to take stronger action.”
The Tax Office was caught up in a phoenix scandal in June when the deputy commissioner in charge of coordinating raids on suspected phoenix companies, Michael Cranston, resigned after he was captured on tape allegedly telling his son how to avoid being prosecuted for tax fraud.