Andrew Leigh

SPEECH, HOUSE OF REPRESENTATIVES

WEDNESDAY, 30 MAY 2018

I move the second reading amendment that has been circulated in my name:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House calls upon the Government to seriously tackle phoenixing and the black economy, including by urgently introducing legislation requiring every company director to be issued with a unique Director Identification Number”.

A couple of years ago, the Australian Taxation Office conducted a number of audits into illegal phoenixing activity. Following one of those audits, a Tasmanian business owner was charged with fraud for phoenix activity, which was alleged to have involved an original company that operated a chain of restaurants.

According to the charges, the owners sold all the plant and equipment to another company, but didn't get paid. They moved the restaurant leases to the other company and then they put the original company into liquidation, leaving creditors with access to no assets. This is classic phoenixing activity in which a firm is deliberately burned and its assets moved to a new company.

Dodgy directors are in the minority but those who do it hurt their creditors, hurt taxpayers, hurt workers and hurt honest businesses. We have estimates of the cost of phoenixing activity in Australia. They're old estimates, because the government hasn't yet released the updated PricewaterhouseCoopers estimates, but even those outdated estimates suggest that phoenixing activity could cost every person in Australia $100 a year or more.

Labor has a plan to crack down on dodgy phoenixing activities. Over a year ago we announced that a Shorten Labor government, through a package of measures, would crack down on dodgy phoenixing activities. That package was based upon work done by the Melbourne Law School and Monash Business School phoenix research team. It included increasing the penalties associated with phoenixing activities, introducing an objective test for transactions depriving employees of their entitlements, clarifying the availability of compensation orders against accessories and consulting on targeted integrity measures, based on those recommendations from the phoenix research team.

But the principal measure underlying Labor's package, announced alongside the member for Gorton, was to ensure we have a director's identification number, with a 100-point ID check, because the extraordinary thing in Australia today is that it is tougher to open a bank account than it is to register as a company director. That means that a small minority of dodgy directors are setting up under multiple names, burning companies, and then re-registering as new company directors under a different name. To recognise how easily this could happen, I have to say that a backbench member of the government, a Liberal Party representative in this House, was registered under multiple names as a director. In that instance, I'm sure the error was inadvertent, but the fact that it could happen so easily to a member of the federal parliament illustrates the problem we're battling here in cracking down on dodgy directors.

The tax commissioner, Chris Jordan, said in response to answers to one senator that the current law was so easy that you could almost register your dog as a company director. That's why, on 24 May 2017, Labor announced that we would act. We would insist that all directors have a director's identification number. That's 371 days ago and we are yet to see any action from the Turnbull government. That's despite the fact that, in principle, they are supportive of the measure.

On 12 September last year, the coalition belatedly announced that they would follow in our footsteps with the director's identification number. That's 260 days ago. For 260 days the dodgy directors have been able to continue burning firms, hurting taxpayers, workers, and honest businesses—260 days in which dodgy directors have been able to siphon money out of our economy, yet the government has failed to act. It is 371 days since Labor said we'd act on dodgy directors. It is 260 days since the coalition said they would act on dodgy phoenix directors and we've still seen no legislation in this parliament.

The measures in this bill are unexceptional. They deal with the use of electronic sales suppression tools, prohibiting their production, distribution and possession to incorrectly keep tax records. The measures in this bill require entities having an ABN providing courier or cleaning services to report to the Australian Taxation Office information about transactions that involve engaging other entities to undertake those courier or cleaning services for them.

But the measures missing from this bill are the critical ones.

We need action to crackdown on dodgy phoenix directors. While the government is unwilling to crackdown on dodgy phoenix directors, it isn't taking the critical action which the experts recognise is needed.

It is not just Labor that believes we need to crackdown on dodgy phoenix directors. We have seen a plethora of organisations, across the political spectrum, saying that we need to stamp out this activity. Really, this activity is like tanking in AFL: it's failing to do your best, deliberately sucking resources out of one company and moving them into another company. We have seen the Productivity Commission, the Australian Institute of Company Directors, the Australian Small Business and Family Enterprise Ombudsman and the Australian Council of Trade Unions calling on the government to introduce a director identification number. The government have said that they will do it. They said 260 days ago that they'll do it, but there are still crickets when it comes to real action on dodgy phoenix directors. These measures may well add to the budget bottom line, but when we look at the budget papers the only revenue impact is an asterisk. It is an unquantifiable addition on to revenue, but it is an expense of a total of $40 million ov er the forward estimates. We certainly hope that these measures in the bill that we're debating today will add to the budget bottom line. But, as it is, we have unquantifiable impacts.

Reducing the prevalence of the black economy is absolutely critical, but it's Labor's leadership on this issue which has marked the true difference between the political parties. Australians should not have had to wait more than a year for this government to introduce a director identification number. When it comes to their proposed amnesty on employers who haven't paid superannuation for the past 25 years, that has been announced and they are trying to implement it straight away. But when it comes to action on dodgy directors, they are as slow as a wet week. They are failing to act on the dodgy phoenix directors who are costing the Australian economy billions of dollars. Labor will act. A Shorten Labor government will crackdown on dodgy phoenix directors because we want to ensure that honest businesses, workers and taxpayers aren't being hurt by this egregious activity.

ENDS

Authorised by Noah Carroll ALP Canberra.