New Anti-Phoenixing Provisions Introduced by Commonwealth Parliament

By Krisha Reddy, Law Clerk and Alicia Hill, Principal, MST Lawyers

On 17 February 2020 the new Treasury Law Amendments (Combating Illegal Phoenixing) Act 2020 (Cth) (Act) was given royal assent. The Act amends the Corporations Act 2001 (Cth) (Corporations Act) and various GST and Tax Acts to increase the level of accountability of company directors. All new provisions will be in operation by the new quarter starting 1 April 2020 so it is important for companies to remain aware of updates in this area despite the challenges currently posed by COVID-19.

Phoenixing offences

Schedule 1 of the Act introduces new mechanisms to the Corporations Act to combat creditor-defeating dispositions, including transfers of company assets for prices less than market value which in turn hinder a creditor’s access to company assets during liquidation.

There are new criminal and civil penalties for company officers and others who fail to prevent such dispositions and amendments that allow creditors to recover assets and be compensated where necessary.

Improving accountability of resigned directors

Schedule 2 of the Act prevents directors from improperly backdating resignation notices or ceasing to be directors if it would leave the company without any directors.

If a resignation is reported to ASIC more than 28 days after it is said to have taken place, the resignation will actually take effect on the day it was reported to ASIC.

GST estimate and director penalties

Schedule 3 of the Act allows the Commissioner of Taxation to collect estimated anticipated GST liabilities from companies and in some circumstances make company directors personally liable for GST liabilities.

This extends the current director penalty regime, where a director is liable for a company’s unpaid PAYG withholding amounts and superannuation guarantee charges.

Retention of tax refunds

Schedule 4 of the Act allows the Commissioner of Taxation to retain a taxpayer’s tax refund where they have failed to lodge their tax return or provide other information that may affect the amount of the refund. This is to ensure that taxpayers have satisfied all their obligations before being entitled to a refund.

If you have any questions regarding the matters raised by this article or directors duties, please feel free to contact Alicia Hill on +61 3 8540 0292 or alicia.hill@mst.com.au.