Andrew Leigh

Phoenixing Activity 

Tuesday 13 June, 2017

When he rolled the then Prime Minister, the member for Warringah, the member for Wentworth said that his chief rationale was that Australia needed economic leadership. Since then, we have seen record government debt—shortly due to hit half a trillion dollars—profits surging, real wages falling, the slowest GDP growth on an annual basis since the global financial crisis, home ownership at a 60-year low and inequality at a 75-year high. It does not sound very much like economic leadership to me.

But today I want to focus on the issue of dodgy phoenix directors. We know, in many of our communities, that phoenixing activity is a scourge on honest businesses. When dodgy directors are able to tank a firm, take its assets and start a new one, they hurt their suppliers, their workers and the taxpayer. And yet the government has been unwilling to act on a string of important reports on this. I commend the team at Melbourne Law School and Monash Business School that has set up a phoenix research program and produced a set of important recommendations over the last few years. That builds on PricewaterhouseCoopers's analysis suggesting that phoenix activity five years ago cost the Australian economy up to $3 billion—a number that is surely higher today. We hear the stories through our community—the bricklayers, chippies and electricians who are ripped off by dodgy phoenix directors. We have more stories in the press today about phoenixing activity.

That is why Labor has announced a package of measures to tackle dodgy phoenix directors. We have said that we will require all company directors to get a director identification number with a 100-point ID check to deal with the problem that it is currently tougher to open a bank account than to become a director. Chris Jordan, the tax commissioner, told a senator in estimates recently that he could easily register that senator as a director and they would not even know about it. One expert says the laws currently are so lax that you could almost register your dog as a director. That is why Labor believes that we need a director identification number.

We also support increasing penalties associated with phoenix activity, introducing an objective test for transactions that deprive employees of their entitlements, clarifying the availability of compensation orders against accessories and consulting on the targeted integrity measures based on the recommendations of the Melbourne-Monash Phoenix Research Team. In this, we are backed by a string of entities. Who supports Labor's director identification plan? The answer is: really, who does not? Supporters include the Australian 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 the phoenix project.

Indeed, the only body of any significance in Australia that does not support a director identification number is the Turnbull government. Perhaps the minister will tell us, at some stage later in this debate, why the Turnbull government are so slow to act on dodgy directors and why it is that they are not willing to crack down on this activity that is doing so much harm in the economy and why it is that they are more focused on giving a millionaires' tax cut and cutting penalty rates than they are on dealing with dodgy directors. The government say they care about debt yet they have delivered record debt to Australia, with debt per person increasing by around $4,000 just since the coalition came to office. They say they care about the cost of living, yet they have seen real wages growth at the worst that it has been since records began. They say they care about fairness, but their tax plan would raise taxes on minimum-wage workers yet cut taxes on millionaires. There is nothing fair about doing that when inequality is the highest it has been in 75 years. They are a government which are unwilling to get tough with the strong and are always going after the weak, leaking story after story about 'welfare cheats' to tabloid newspapers, but, when it comes to tackling the scourge of phoenix activity, the government are unwilling to act despite calls for action across the political spectrum.