It's time to crack down on phoenix activity in Australia
The Canberra Times, 24 October 2018
When Megan was seven years old, her dad lost his job.
The factory where he worked closed and his full time job suddenly vanished, along with any payouts he may have been entitled to.
Megan told me that she loved her childhood with her father. Not having to work meant he could walk her to school every day and help her organise her toys.
To her, there was nothing wrong – but it was a different story for her parents.
Looking back as an adult, Megan realised the walks to and from school were because her family could no longer afford the petrol. They weren’t helping her organise her toys for pleasure - it was a way to sell some to pay household bills.
Megan’s family is just one of the many victims of phoenix activity, a practise running rampant across Australia as dodgy directors deliberately burn companies to avoid their obligations to employees, government and honest businesses.
The workers left behind don’t get any compensation and the tax burden gets passed onto other Australians across the country. The entire country picks up the slack while the directors go on to open new business after new business, making more profits and leaving further destruction in their wake. Phoenix activity costs the economy billions of dollars every year.
Part of the problem is that it’s far too easy to become a phony company director.
One expert told a Senate Estimates Committee last year that ‘you can, almost literally, register your dog as a company director’. The Tax Commissioner later told a member of the same committee that ‘I could appoint you as a company director without you even knowing’.
Currently it is simpler to become a company director than open a bank account. And while we don’t want to discourage entrepreneurship, we also need to ensure that people aren’t rorting the system to hurt others.
Requiring all company directors to obtain a unique director identification number could put a significant dent in dodgy phoenix activity. Labor’s push to implement director identification numbers has been backed by the Productivity Commission, the Australian Institute of Company Directors, the Tax Justice Network and the Australian Chamber of Commerce and Industry.
Director registration could require a 100-point identification check – just like the one you do when you open a bank account.
This type of program could help track the dodgy behaviour by directors and ensure that no one’s identity becomes blurred. Right now, there are plenty of mistakes in the register. A few years ago, it came to light that a Liberal backbencher was listed three times on the director registry, with different birthdays each time. It was surely an oversight, but it put a spotlight on how easy it would be for a malicious person to create false directorships.
Director identification numbers are the most important reform required to crack down on illegal phoenix activity, yet the Abbott-Turnbull-Morrison Government has moved on it with all the speed and enthusiasm of a man wading through treacle.
It’s been 15 months since Labor announced our policy to put them in place and nearly 12 months since the Liberals backed it. But the legislation is yet to be introduced into parliament, and we still don’t know key details, like how identify will be verified, and when the scheme will start.
Stories like Megan’s show why Australians can’t afford the Coalition dragging its feet.
Honest families deserve to be protected. Director identification numbers will bring us one step closer to ensuring no family will ever have to make the difficult choices that Megan’s parents had to.
Andrew Leigh is the Federal Member for Fenner, and his website is www.andrewleigh.com
Authorised by Noah Carroll ALP Canberra.