ATO, ASIC raids target properties linked to phoenix advice firms
The Australian 12:00am August 12, 2016
Anthony Klan
The tax office and corporate regulator have raided more than a dozen properties in connection with two “pre-insolvency” advice firms as part of a crackdown on spruikers of illegal tax avoidance methods.
About 120 Australian Taxation Office and Australian ¬Securities & Investments Commission officers raided 13 businesses and homes in suburban Melbourne and the Gold Coast yesterday.
The ATO is targeting businesses alleged to be spruiking “phoenix” advice to clients.
Phoenixing is the process whereby a company, often ¬operated by tradesmen and property developers, closes its business citing insolvency to avoid paying debts, only to resume trading under a different name.
ATO deputy commissioner Michael Cranston said his office had received complaints about the practice from “legitimate ¬insolvency practitioners” and members of the tax profession.
“These visits are part of an ¬ongoing investigation into the ¬activities of a firm of pre-¬insolvency advisers and their ¬involvement in encouraging and facilitating illegal phoenix ¬activity, evading GST and failing to pay tax on $22 million of unreported income,” Mr Cranston said. He said “pre-insolvency” advice firms had been monitoring public databases for indications that companies might be in ¬trouble — such as them receiving a statutory demand following an alleged ¬unpaid debt — and then contacting those companies ¬offering their services.
“They’ll say, ‘Let us have a look, we can fix it up,’ ” Mr Cranston told The Australian in an interview yesterday.
“They may charge $20,000 but they will say they can help protect assets, such as by taking on new loans or by selling assets undervalued to an associate of the business. Then they can set them up with a new company and they are up and running again.”
Ian Read, who headed up yesterday’s ATO raids, reported finding one company with annual sales of $2.2m but which only ¬declared sales of $100,000.
Another company had an annual turnover of $1m but had not furnished a tax return at all.
Mr Cranston said pre-insolvency practitioners operated in an unregulated environment.
“By showing up unannounced we’re able to access records that we might never have seen,” Mr Cranston said
“This information is then used to take further compliance action and shared among out partner agencies to better inform [about] our strategies targeting the 50 highest-risk phoenix operators.”