MONDAY, 12 NOVEMBER 2018
SUBJECT: Labor's plans to crack down on dodgy phoenix directors.
DES HARDMAN, LABOR CANDIDATE FOR FORDE: Good morning everybody. My name’s Des Hardman, I’m Labor’s candidate for Forde at the next federal election. I'm here today with Shadow Assistant Treasurer Andrew Leigh and our candidate for Moncrieff Tracey Bell, as well as Bernard Moolman from Ozzie Electrical and Solar. Today, Andrew’s been down on the Gold Coast, talking to business owners about our proposed changes to laws for phoenixing companies and the impact that we expect that we can make and have and to improve the lives of working people here in our community. It really is a shame that companies can take advantage of the current situation and the current laws to their own advantage without giving any consideration whatsoever to the impact that they're having on the lives of working people and their families in our community.
TRACEY BELL, LABOR CANDIDATE FOR MONCRIEFF: I'm Tracy Bell. I’m the candidate for Moncrieff. I'm really, really happy to see this policy and to be standing with Labor and beside Andrew and Des here to announce this. We really, I see firsthand how the effects are, how this affects the normal everyday working people. I'm a director of child care centre and I'm having these conversations myself with families, even this morning, who can't afford to pay their things because they haven't been paid for reasons like this.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks Des and thanks Tracey. My name’s Andrew Leigh, I’m the Shadow Assistant Treasurer.
This is a beautiful part of the world - but we're facing an ugly reality in the growth of phoenixing. We've seen in recent years firms on the Gold Coast go into liquidation without paying other businesses, their workers and taxpayers. A recent report estimates that phoenixing could cost the Australian economy as much as $5 billion a year. This isn't just businesses that get burned - it is families and workers. What we've announced as the Labor Party is that we would put in place a director identification number to deal with the problem that at the moment, as one expert puts it, you could almost register your dog as a company director. The Tax Commissioner told one senator that he could can sign them up as a company director without them even knowing.
The current laws around director identification numbers are too lax. In May 2017, Brendan O’Connor and I announced Labor’s anti-phoenixing plan. The coalition has agreed in principle, but in practice, we don't have any action until some time off in the never-never. Labor has also announced that we would put in place additional powers to crack down on phoenixing. In particular we would give the tax commissioner the power to apply to ASIC for the disqualification of directors in the case of egregious non-payment of taxes. We would also put in place ‘name and shame’ powers, which the experts say can be an important additional arrow in the quiver of those seeking to crack down on dodgy directors.
We know that if we don't crack down on dodgy phoenix activities, it's going to hurt businesses, taxpayers and honest workers. We've got Bernard here to tell us firsthand some of the effects of phoenixing on his business.
BERNARD MOOLMAN: Well, I just wanted to stand up for not just the small business owners, but tradesmen in general out there that has been lost, that have lost a lot of money and was hurt by all this that's been happening in the construction industry. We personally were hurt by one of the builders based in Brisbane and on the Gold Coast in excess of $88,000 and it's hard for us to keep a straight face and keep on paying our suppliers and the people that need the money, whether that’s ATO or - even worse - our staff. We had to let staff go and it's a shame to see so many people get hurt and the big boys are just closing a company and opening another one the next day and keep on going as if nothing's happened. If we want to try that, we'll be shamed. The electrical wholesalers, all the wholesalers would refuse to open accounts in our name again because we didn't pay them. But it's not our defaults. We’re trying to do the best thing we can and we get hurt from other people that they don't have a conscience and they are led to believe they can just keep on doing it.
REPORTER: So you feel like they’re just snubbing their noses at you and they really don’t, they’re not thinking about how it affects anyone but themselves? Is that how it feels?
MOOLMAN: It's does, yes. It does. A lot of the small companies like myself, they are unsecured creditors because the big companies, the big bullies, do not want to sign something with you if you if you're a secured creditor. And if you do, they just take someone else because so many tradies on the coast. And it's hard because you don't have a leg to stand on at all.
REPORTER: You work in the industry so, is something - obviously being affected personally, but is it something that you hear about fairly often?
REPORTER: You’ve heard what they’re proposing here today. Do you think that’s enough?
MOOLMAN: Well it's a start. We'll never know whether it's going to be enough and I'm sure they’ll get a way around it again. But at least it's a start to maybe put a stop to it. And let's hope it does.
REPORTER: So the naming and shaming. Are you supportive of that?
MOOLMAN: Other people will quickly name and shame me if I don't pay my suppliers, so I'm sure it’s just the right thing to do, yes.
REPORTER: What are your thoughts on the process to date? This happened to you back in 2016, we’re now in 2018. It’s a helluva long time.
MOOLMAN: It is and it’s been going on, the hurt, to try to recover $88,000. There's a lot because, you just keep on robbing Peter to pay Paul. You know, I wanted to be well ahead in my company and it’s just so hard to be where I am and, like I said earlier, those sleepless nights you know sometimes you're really just don’t want to keep going. You don’t want to wake up on Monday morning, because you know someone’s going to give you a bill, ask you when you’re going to pay them. You want to do the right thing and not do that to anyone else.
REPORTER: But it does affect other people? Like you said, you may have let off 30 staff, but them there’s the flow on effects.
MOOLMAN: Most definitely, yes. And it’s not just the staff, though they are important because that's my number one priority every week is to pay my wages on time. Because I know they’ve got people relying on that, to pay school fees and buy food. So my staff is number one, but close on that is my suppliers. And it just keeps on going [inaudible] if you pay them later and it’s just, you know, it’s bad for you because you want to try and do the right thing, like I said, and you get stopped and there's nothing you can do about it. You know, like I said, you’re not a secured creditor so I'm not a big company that can handle it so they just roll over you.
HARDMAN: Bernard, it's really hard for me personally to hear your story and to hear how this impacted on you and I know that you're not the only one that's affected. And as a community, people like yourself and your colleagues in the same industries and in any construction need to stand together and stand against these big guys to stop this type of thing from happening. Support Labor, because we're going to support you in changing, doing the things that we care to change these laws to make sure it doesn't happen in future, mate.
MOOLMAN: Let's hope someone does. Another company [inaudible] sake, they were owed in excess of $165,000. He’s closed his doors. Luckily. I'm still around. But, some people in the construction, I think you know, there’s figures on how many people can’t handle it, to come in tomorrow, they commit suicides and decided to go to extremes and that’s the reality out there I’d like it to stop for good.
REPORTER: This isn’t a new concept - I mean, we've been talking about phoenixing for quite a while. You brought up the report earlier. What’s taking so long, why is the federal government just let this go?
LEIGH: That’s exactly the question we’ve been asking. I mean, the director identification number is supported by the Australian Institute of Company Directors, it’s supported by the Australian Restructuring, Insolvency and Turnaround Association. It’s supported by the Australian Council of Trade Unions, by Master Builders Australia. If you can find me another policy in Australia supported by that many outside groups, I'd like to hear about it. The fact is this is straightforward. We need to get it done. We have a straightforward way of assessing identity when you open the bank account - it’s a 100-point ID check. But at the moment it's tougher to open a bank account than it is to register as a company director. The government just needs to make this a priority. While they're quick to beat up on welfare recipients, they’re glacially slow when it comes to cracking down on dodgy phoenix directors.
REPORTER: So, will Labor be introducing a bill on this or are you waiting for the LNP to do so? What’s the next step?
LEIGH: We're in opposition. We’re committed to committed to doing this quickly under a Shorten Labor Government, but we believe that the government could act immediately on this. They need to put their legislation where their mouth is. They need to get it done.
REPORTER: The construction industry is a huge driver for the Australian economy and particularly here on the Gold Coast. So having these sorts of companies doing this, I mean, what does that do to our reputation and to our people?
LEIGH: It harms firms like Bernard’s, but it also erodes trust in the entire system. One of the reasons why people are willing to work with others is because there is a bedrock of trust. You take that away from an industry and suddenly business breaks down. One of the reasons why people pay their tax bills is they believe we’re in a society where others are paying their tax bills. So where some can get away with not paying tax, you erode trust in the tax system. This is a pro-business measure.
REPORTER: Are there enough people on the ground in the tax office and the watchdogs to actually enforce this?
LEIGH: The tax office staff’s been cut some 4,000 since the Abbott-Turnbull-Morrison Government came into office. That’s made that very hard for them to crack down on tax avoidance, on this and on a host of other issues.
REPORTER: What's your definition of phoenixing? How would I, what is a phoenix?
LEIGH: Phoenixing is essentially where someone deliberately shuts down their own business and transfers the assets to a new entity in order to elude the creditors. Of course, some businesses fail.That's true in cafés as it is in construction. But phoenixing is where someone deliberately strips the assets out, diddles the creditors and leaves the economy worse off as a result of deliberate wrongdoing.
REPORTER: Do you have any idea how common it is? Do you have any stats or anything? It’s obviously common enough that [inaudible]
LEIGH: Common and rising. So the estimates from PWC, which has done the most accurate reports on this, puts the cost of phoenixing to the Australian economy at $5.1 billion. Some of that’s cost to taxpayers. Some is a cost borne by workers. Most of it is a cost borne by other businesses like Bernard’s.
No more questions? Thanks everyone.
Authorised by Noah Carroll ALP Canberra
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