Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 is a positive step towards tackling the immoral practice of phoenixing which, by design, is all about swindling innocent people. We've all heard the stories. We know the characters. We know the damage they do, and all too often they get away with it. For the few who are prosecuted, the penalties are often measly and not enough to deter wrongdoing. So I very much welcome the government's efforts to fight phoenixing and to stop the rorting which unfairly takes the money from the pockets of employees, subcontractors, suppliers and governments.
A recent example from South Australia bears this out. The Commonwealth public prosecutor recently secured the conviction of a company director who had engaged in illegal phoenix activity. This director operated two entities, Eastwood Insulation and Thermal Clad. Thermal Clad held the assets and Eastwood Insulation held the debts. When Eastwood was inevitably placed into administration, it owed more than $2 million, including $1.2 million to the tax office.
The damage from this kind of behaviour is widespread. Employees are suddenly unemployed, and then they find that they're owed wages, entitlements and superannuation. In construction, customers find that jobs are left unfinished and their deposits or progress payments have, incredibly, disappeared. Subcontractors and suppliers don't get paid, so cash flow problems ripple throughout the economy. And of course the broader community is affected when taxes aren't paid to state and Commonwealth governments. There is also flow-on reputational damage that affects others in the sector and casts suspicion on honest operators.
I don't believe that this bill will fully stamp out phoenixing, but I do believe that it will help. First, it will allow ASIC and the courts to unwind transactions, such as when dodgy directors strip out assets before a business goes bust. This will ensure that administrators can access a firm's assets and pay creditors. Second, the law will impose new rules on directors. It will prevent resignations in certain circumstances, prohibit backdated resignations and make directors personally responsible for GST and other liabilities to the Commonwealth. These measures will make directors think twice before they engage in unethical business practices.
Some have argued that this bill impinges on the workings of the free market, particularly an individual's right to have a business without facing any personal risks. Well, let me say that I disagree 100 per cent. I've run a number of businesses over the past 40 years and I can tell you that risk exists whether you want it or not. A prudent manager knows the state of their business and runs it accordingly. You know when trouble is coming and you can make choices. You can shut the business down. You can contribute additional capital. You can call in the administrators. What you can't do is take money that legally belongs to other people and use it to prop up your business. In my book, that's no different to stealing—stealing from your workers, your suppliers and taxpayers—and it deserves to be treated in the same way.
I am very pleased that the government has introduced these measures, and I agree with Labor: a little late, but it is good that it has been finally introduced. The bill is a good start to dealing with bad business behaviour and holding dodgy directors and business owners to account, and I very much look forward to its passage this morning.