The building industry is heavily affected by illegal phoenix activity, in which a company is deliberately liquidated to avoid paying its debts, including creditors, employee entitlements and taxes. The business then resurfaces operating as a new company.
image

The Australian Taxation Office (ATO) led Phoenix Taskforce is currently targeting illegal phoenix businesses to not only ensure they pay creditors and employees the right amounts, but also make it fair for those who do the right thing.

There are several precautions you can take to protect your business from illegal phoenix activity. Before engaging in business with a company, protect yourself by:

  • Conducting a background check: Conduct a simple online search of the company and its director(s) or conduct a formal credit check, seek references or purchase a company report through ASIC.
  • Checking the ASIC register: Search the director(s) on ASIC to see if they have been suspended or disqualified from acting as a director.
  • Limiting the impact of risky companies on your business: You can do this by assessing whether you are taking adequate deposits from high-risk companies, asking for upfront payments and/or ensuring that you have other sources of income from various companies. You can also customise your payment terms and contract conditions with high-risk companies and mitigate risks by asking for a company director's guarantee or bank guarantee.
  • Protecting yourself from tax evasion or fraud: To avoid getting involved with a company involved in illegal phoenix activities and exposure to penalties, you can include terms in your contract that requires the company to show that it is compliant with its tax obligations, including to employees.