Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 concerns the practice of illegal phoenixing. It aims to combat this practice: the unscrupulous art of stripping assets from one company to another to avoid paying debts. It attempts to combat phoenixing by creating a range of new powers for regulators. Unfortunately, if left unamended, it will fall well short of its lofty objective.

The bill includes a new phoenixing offence that will catch directors who make creditor-defeating dispositions, enabling ASIC to make orders to recover company property in phoenixing cases. This includes new measures preventing directors from improperly backdating their resignations—a classic trick of the trade in phoenixing. The bill also provides new powers for the ATO in relation to GST liabilities and tax refunds. These new powers will improve their ability to chase down the tax cheats who seek to defeat the ATO through the use of illegal phoenixing.

Illegal phoenixing is a serious issue in this country, costing Australian workers and small businesses billions of dollars every year. We're talking about dodgy directors who make a habit of stripping businesses of their assets, skipping out on their debts to their workers and their creditors, and starting a new business out of the ashes of the old, only to run the whole game all over again the next time the going gets tough. We're talking about developers who build apartment buildings with glaring defects, only to vanish in a puff of paperwork and smoke, leaving the owners holding the repair bill.

In 2018, PricewaterhouseCoopers estimated that the annual direct cost of phoenixing activity to the Australian economy could be between $2.9 billion and $5.1 billion per annum. This includes up to $3.2 billion worth of unpaid invoices for services provided, and up to $300 million of unpaid entitlements for Australian workers. And that only includes the direct costs; we are not counting the stress imposed on small-business owners who hold unpaid invoices from companies that no longer exist, or the heartache on employees who go unpaid at the end of a hard day's work.

This issue has hit home in just about every electorate in this parliament, I dare say. Earlier this year, I watched A Current Affair with horror as they showed the story of Tara Teo, a local woman from my electorate who was caught up in the collapse of JUMP! Swim Schools franchises. I have spoken to Tara and learned more about her story. Tara entered into an agreement with JUMP! Swim School two years ago to purchase a swim school franchise in Albion Park. Her initial investment was $150,000 to build the facility and get started with the business.

Tara wasn't a fool: she did her research and she looked into the company. At the time, JUMP! Swim Schools had 66 trading sites across Australia. But, a year later, nothing had been built. When Tara chased things up, she was shocked to discover that the company had been trading insolvently since March 2016. The company went into liquidation and Tara lost everything. Meanwhile, the CEO of the company, Ian Campbell, was able to go to the United States and open up 11 new franchises—and not just in America; his company has operated franchises in New Zealand, Brazil and Singapore. The court cases are still going on, but the damage to Tara and her family has already been done. I know the ACCC is already on the case, but I urge overseas regulators to look carefully into the activities of Mr Campbell and his dubious dealings as well. If PricewaterhouseCoopers are correct, then she is sadly far from alone out there. It is time that we did something about the laws that let people like Mr Campbell get away with these disasters.

Labor has long urged the government to act on illegal phoenixing, and we congratulate them for finally getting some work done on this bill. We support the bill in its objectives. However, it doesn't go far enough. The fact is that it will do relatively little to combat illegal phoenixing. More needs to be done. The Australian expert on this is Professor Helen Anderson. She says that these laws won't solve the phoenixing problem. What we need is a system to identify the dodgy directors. Right now it's easier to start a company than it is to open a bank account. You don't need 100 points of identification. You can even register a directorship in someone else's name or, astoundingly, in your dog's name. I look back to the case of Philip Whiteman, the pre-insolvency adviser who reportedly used the names of vulnerable people without their consent to create dummy directors of companies and to help the real owners escape prosecution. It was reported widely. A banker from Geelong was installed by Mr Whiteman as a director of three different companies that he'd never heard of. Another man, suffering from homelessness at the time, was installed as the director of multiple businesses and hit with more than $6 million in director penalty notices and other fines. His Centrelink payments were cut off because of the mistaken belief that he was the genuine director of these companies that he had never heard of. This is utter madness. It is well past time that this sort of legislation was passed, legislation which would implement an identification check for company directors so that we can properly enforce existing antiphoenixing laws.

In February of this year we had some hope. In February, the moribund Morrison government finally introduced legislation to introduce a system of director identification numbers, a policy that Labor had backed for years, alongside a huge range of other stakeholders. I list them: 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, and the Australian Restructuring Insolvency and Turnaround Association. But this legislation has been nowhere to be seen since the election. Instead, the government has decided to introduce this bill, with the grandiose claim that it will combat illegal phoenixing, when stakeholders agree that it will barely shift the needle.

This is why Labor will be introducing a significant amendment to this bill, a bill that will implement director identification numbers and modernise the ancient legislation surrounding Australian business registers. This is a commitment that was laid out in the 2018-19 budget, some 17 months ago, by the then Treasurer and current accident-prone Prime Minister. Australians should be asking themselves whether they can trust any commitment that the Prime Minister makes if the members of the government fail to vote in favour of the Labor amendments.

We will be introducing the complete text of the Treasury Laws Amendment (Registries Modernisation and Other Measures) Bill 2019. It was a bill introduced in February this year by the then Assistant Treasurer, the member for Fadden, as a series of schedules to this bill. These amendments would implement the government's stated objective of dealing with phoenixing. These amendments will implement the government's own longstanding but sadly until now entirely theoretical commitment to modernise business registers and set up director identification numbers. It's not very often in this place that I quote favourably the honourable member for Fadden. When he introduced the bill earlier this year he said: 'The Morrison government's legislation will modernise the administration of business registers. Currently, the data is hosted in different systems across various departments and agencies, imposing inefficient cost burdens on registrants in meeting their registration obligations and making it difficult and time consuming to find information. The legislation also introduces a legal framework for director identification numbers. This will provide greater insights to regulators, businesses and individuals on the identity and affiliation of directors.' They are laudable words—I agree with every single one of them. I expect the member for Fadden will be joining with Labor members when these amendments are introduced. I expect that he'll be voting in favour of his own words and his own bill.

These are all worthy goals—worthy goals that this government has seemingly abandoned sometime between February this year and today. It seems that not only do the government not have a plan to govern and support the economy, but they've given up on the few actual plans they had before the election. It thus falls to Labor to introduce the government's own legislation. We'll be doing the government's work for them once again. The member for Forde is about to speak on this bill. I expect that he'll be speaking in favour of the amendments that I have foreshadowed and that, when it comes to voting on those amendments, he'll be joining with Labor—the only sensible thing to do. He supported them once; he voted for them once when they went through their party room. I expect that he and all other members will vote for them when they have the opportunity to vote for them in this House today. We're also introducing a separate amendment to this bill that will require a review to be completed in five years time. This will let Australians get a better understanding of how effective these laws have been in combatting the terrible cancer of illegal phoenixing.

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