Trust change uncertainty doesn’t rule out illegal phoenixing activity, accountants say

Griffith noted the major cost and time blowout that SMEs risk with a restructure.

“You've got a lawyer's time, you've got an accountant's time in setting all this stuff up, we've got the business owner's job which is to pick a date to cease trading in one ABN and commence trading in the next ABN.”

With the ATO accepting the Australian National Audit Office's (ANAO) recommendations to set targets to reduce the volume of small business collectable debt in late June, many are left wondering whether this will signal a crackdown on small business tax debts.

In a statement provided to Accountants Daily, the ATO said that it welcomes the ANAO's audit of the ATO management of small business collectable debt.

"The ATO’s core focus is collecting the right amount of tax owed to the Australian community, balancing firm, timely actions where needed with appropriate support for those who need it," the Tax Office added.

“This is kind of like the perfect storm, because having made small business restructuring more difficult [and] you've got increased ATO action, and now you've got this trust thing coming in, everything is channelling these small business owners towards potentially illegal or grey phoenixing activity.”

CPA Australia policy adviser Gavan Ord (pictured, right) said: “Unscrupulous players are quite adept at getting people in businesses into stress to restructure.”

While it is too early to speculate on how these trust changes will impact insolvency numbers, Ord said that when the legislation does come out, businesses should seek tailored advice and note the nuances to determine the best option for them.

“[There is] a lot of uncertainty at the moment for some businesses that run through discretionary trusts … some decisions are being held back until [businesses] see the legislation … tailored advice is necessary for every business [operating] through a discretionary trust,” he said.

“If this legislation passes, it is going to be a lot of work [for accountants]; there is going to be a need for a lot of training, and everyone's going to have to go on alert around [restructuring].”

Ord emphasised that it is too early to speculate on the impacts of the trust changes; however, he warned that if legislation is rushed through without proper consultation, the risk of illegal phoenixing will increase.