The Government has announced a package of reforms to combat phoenix activities, including the introduction of a Director Identification Number (DIN).
Phoenixing involves deliberately transferring assets from a failed or insolvent company to a new company, with the intention to avoid paying the original company's creditors, tax and employee entitlements (that is, the new company illegally "rises from the ashes" of the indebted company).
The proposed DIN would identify each director with a unique number, and interface with government agencies and databases to allow regulators to map the relationships between directors and entities, and between directors and other people.
In addition to the DIN, the Government will consult on implementing a range of other measures, including:
- legislating on specific phoenixing offences, to better enable regulators to take decisive action against those who engage in this illegal activity;
- establishing a dedicated phoenix hotline, to provide the public with a single point of contact for reporting illegal phoenix activity;
- extending the penalties for promoting tax avoidance schemes to also capture advisers who assist phoenix operators;
- giving the ATO stronger powers to recover a security deposit from suspected phoenix operators;
- extending the director penalty provisions to make directors personally liable for GST liabilities;
- preventing directors from backdating their resignations to avoid personal liability or from resigning and leaving a company with no directors; and
- prohibiting entities related to phoenix operators from appointing liquidators.