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A bill proposing to introduce new anti-phoenixing laws has been given the green light by a Senate committee, meaning directors could soon be personally liable for GST obligations.
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Director GST liability inches forward with Senate committee approval
29 March 2019
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The Senate Standing Committee on Economics has recommended that the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 be passed, after the Senate referred the bill to the committee last month.
The bill seeks to implement four measures to combat illegal phoenix activity, including new offences to prohibit creditor-defeating dispositions; preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors; extend the estimates and director penalty regimes to GST liabilities, including the Luxury Car Tax (LCT) and the Wine Equalisation Tax (WET); and authorising the commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information.
The committee heard from 20 submissions, noting that submitters were mostly supportive of the purpose of the bill and the need to address the $5 billion phoenixing problem.
GST liabilities
Should the bill pass in its current form, the Commissioner of Taxation will be allowed to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances.
The extension of the director penalty regime is estimated to rake in $40 million over the forward estimates period.
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RSM senior manager Tracey Dunn said advisers should look to inform clients who may not be aware of the obligations as a director, including small businesses where a spouse or family member has been appointed as a director and is not actively involved in the business.
“Advisers who are aware of clients who may not fully understand their obligations as a director, including exposure to the DPN regime should take the opportunity to be proactive and provide the necessary advice and support to ensure clients both understand and have processes in place, to ensure they meet their obligations,” said Ms Dunn.
‘Enforce existing legislation’
While it broadly supported the proposed reforms to combat illegal phoenix activity, Chartered Accountants Australia and New Zealand (CA ANZ) considered that this outcome “could have been achieved via amendments to existing laws rather than new, highly complex legislation”.
Likewise, the Australian Institute of Company Directors (AICD) said that while it supported the intent of the bill, it “[encouraged] the prioritisation of enforcement of relevant laws, and adequate resourcing of ASIC to facilitate this, ahead of complex and potentially duplicative new provisions in legislation”.
The Australian Restructuring Insolvency and Turnaround Association (ARITA) pointed out existing provisions but said there was insufficient focus on enforcement action to deter such activity.
Labor Senators Chris Ketter and Jenny McAllister echoed those views, calling for the bill not to be debated in the short time remaining in this term of the Parliament in order to provide time to improve the legislation.
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