ATO executes search warrants in phoenix activity investigation

Six search warrants have been executed this week following a multi-agency investigation between the ATO and Australian Federal Police into alleged illegal phoenix activity.

In a public communication, the ATO said the search warrants, which were led by the ATO with Australian Federal Police assistance, were part of a criminal investigation into unpaid superannuation, employee withholding, GST and income tax.

ATO deputy commissioner Michael Cranston said these recent search warrants form part of its joint agency investigations into illegal phoenix activity, where a company deliberately liquidates to avoid paying creditors, taxes and employee entitlements.

“The perpetrators transfer the assets to a new entity, and continue operating the same or a similar business with the same ownership,” said Mr Cranston.

Mr Cranston said phoenix activity costs the Australian economy around $3.2 billion each year.

“Honest businesses and individuals suffer the most because debts to suppliers are left unpaid, employees are robbed of their superannuation entitlements, and the community is denied revenue to fund essential services,” said Mr Cranston.

“A phoenix company is often able to undercut other contractors when bidding for jobs, leaving its competitors out of work, whilst the controllers of the phoenix company continue to rip off its employees and suppliers.”

Mr Cranston said there are a number of signs that a business may be involved in phoenix activity.

“Employees may be pressured to take leave or have their employment status changed from permanent to casual,” he said.

“They may also notice that there are frequent changes in the identity of the company that is paying their wages, or that their superannuation entitlements are not paid.”

He urged anyone dealing with a company exhibiting these signs to contact the ATO.

 

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