Andrew Leigh

HOUSE OF REPRESENTATIVES, 12 FEBRUARY 2020

When Megan was seven years old her dad lost his job. Megan told me that she kind of enjoyed it at the time. Rather than having to go to work every day, he would stay home and help her organise her toys. She'd get to walk to school with him, which she only realised later was because the family couldn't afford the petrol. Megan's dad had been the victim of phoenixing in which a dodgy director had shifted the assets out of the company, shut the firm down and caused him to lose his job.

The impact of phoenixing on the Australian economy is massive. PwC estimated that in 2016-17 the impact was at least $5 billion a year. That's $3.2 billion in unpaid bills, $300 million in unpaid employee entitlements, $1.7 billion in unpaid taxes and compliance costs. The stories of phoenix activity are legion. There were suggestions that phoenixing was one of the reasons for delays in the building works recently conducted at Parliament House. I have spoken to tradies on the Gold Coast, in Canberra, in Melbourne, in Sydney and in Western Australia who've told me they've been the victims of illegal phoenixing activities.

Phoenixing erodes the very bedrock of business which is trust.

Who wants to get into business with a handshake if there's a risk that the person you're dealing with could ultimately rip you off? Phoenixing is a huge risk for Australia's tradies, who stand to lose the most.

At the heart of this problem—and the point that the Melbourne University and Monash University team made when they were looking at phoenixing several years ago—is that it is currently extraordinarily easy to register as a company director. It's so easy, in fact, that—as one expert told the Senate committee—‘you can almost register your dog as a company director’. The tax commissioner told a senator on a Senate estimates committee:

I could appoint you as a company director without you even knowing …

The problem came to light a few years ago when a Liberal backbencher turned out to have three listings on the director registry with three different birthdays. I'll accept that that was likely inadvertence rather than malice, but it does illustrate the problems in our director identification system.

It's currently much harder to open a bank account than it is to register as a company director. If you want to open a bank account, you've got to pass the 100-point ID check. If you want to register as a director, you simply sign up. That's a problem that many people in business have said needs to be changed. The list of those who want a director identification number includes the Institute of Company Directors, the Australian Small Business and Family Enterprise Ombudsman, the Productivity Commission, the Tax Justice Network, the Australian Chamber of Commerce and Industry, Master Builders Australia, the Australian Council of Trade Unions, the Australian Restructuring Insolvency and Turnaround Association and, of course, the phoenix project at Monash and Melbourne universities.

That's why, three years ago, the member for Gorton, Senator Gallagher and myself announced that Labor supported a director identification number. We believed that it was critical to move from this outdated system and to put in place a director identification number that recognised the scourge that phoenix activity imposes on the economy; yet the government has failed to act. Three years on—if you believe PwC's estimates to the cost—means we're now $15 billion on. That's $15 billion that's been ripped out of the pockets of tradies, taxpayers and workers as a result of the Abbott-Turnbull-Morrison government's go-slow on implementing a director identification number. The Australian Restructuring Insolvency and Turnaround Association noted that the bill had lapsed after the May election. In the words of ARITA chief executive, John Winter:

Despite the claims of action by government, unfortunately, almost nothing is really being done.

Phoenixing activity is like tanking in sport. We see allegations of tanking in the AFL, Major League Baseball, Olympic badminton, Asian soccer and the National Hockey League, and it never fails to elicit outrage from sports fans. In the same way, if you mention phoenixing to tradies, they'll immediately tell you about times when they've been ripped off, when they've done the work and haven't been paid for it.

The government has taken three years just to get this bill to the parliament. I worry that the implementation may take longer. The government has taken two worthy projects and bolted them together. The worthy project of modernising business registers is worth doing. We have over 30 business registers. They are outdated, they need to be updated and linked together. But as I understand it—and I hope the Assistant Treasurer will correct me if I'm wrong—that project has been tied to the project of implementing a director identification number, with the two jobs being tendered together. A director identification number is a straightforward measure.

Mr Sukkar interjecting—

Dr LEIGH:  I'll take the interjection from the minister. The minister is saying you shouldn't have to pay twice. The thing is, Minister, if you delay this by a single year, you may save a few bucks for the taxpayer—

The DEPUTY SPEAKER (Mrs Wicks):  Order! The member for Fenner will direct his remarks through the chair.

Dr LEIGH:  Thank you, Deputy Speaker. Minister, you may save a few bucks for the taxpayer, but you will cost tradies, workers and taxpayers $5 billion. That's the annual cost of delaying this measure.

So if you think that you are able to delay for a year and save taxpayers, say, $100 million, you've missed the fact that, of the compliance costs, $1.7 billion are in unpaid taxes. So the taxpayer will be worse off, because phoenixing will go on for another year, taxpayers will lose another $1.7 billion—PwC's own numbers, commissioned by the government—and any savings made by tying the simple director identification number project to the complicated business register project will be lost.

It's Labor that has consistently led this debate; Labor that has consistently called for action on a director identification number. We are pleased to see this bill finally before the House today—three years late—and we urge the government to move with all possible speed. We had all sorts of delays with the previous minister. Minister Kelly O'Dwyer, when she had the portfolio, was talking about using biometrics to do it, suggesting that the minister just hadn't thought through the implementation in detail. The government announced that it was going to do this at the beginning of last year, but then didn't move after the election to take action. Australian tradies, workers and taxpayers deserve better.

ENDS

Authorised by  Paul Erickson, ALP, Canberra.