Michael Sukkar (Deakin, Liberal Party, Assistant Treasurer) Share this | Hansard source

I thank the member for Ford for his contribution to the debate. In summing up, I remind the House that this bill amends the Corporations Act, A New Tax System Act and the Tax Administration Act to address a range of activities that support illegal phoenixing.

Illegal phoenixing has been a problem for successive governments over many decades. Sadly, this is not a new problem. Our current laws have not been successful in deterring that illegal activity. This bill will give our regulators additional enforcement and regulatory tools to better detect and disrupt illegal phoenix activity, and to prosecute and penalise directors and others who engage or otherwise facilitate this illegal activity.

The amendments in schedule 1 to the bill include new offences and civil penalty provisions to target those who engage in and facilitate the stripping and transfer of a company's assets below market value with the effect of preventing, hindering or significantly delaying creditors' access to those assets. Asset stripping is a key strategy used by phoenix operators to avoid repaying debts. These offences attract strong penalties and will deter the core behaviours of phoenix operators as well as the facilitators of this illegal activity, such as pre-insolvency advisers. Schedule 1 also introduces a new recovery power for ASIC and extends the recovery avenues available to liquidators to enhance the recovery of assets lost through illegal asset-stripping activity. The new offences and asset recovery provisions will be subject to a number of important safeguards to ensure they don't impact legitimate businesses and genuine efforts to rescue a business that's in financial distress.

The amendments in schedule 2 improve the accountability of resigning directors and prevent directors from improperly backdating their resignation to avoid liability or prosecution for previous misconduct. In addition, the legislation prevents sole directors from resigning and leaving a company as an empty corporate shell with no directors. Together, these amendments combat strategies used by phoenix operators to avoid being prosecuted by regulators.

The amendments in schedule 3 to the bill give the ATO the necessary tools to more effectively collect and enforce tax debts to address the illegal phoenix behaviour. The amendments make directors personally liable for their company's outstanding goods and services tax, luxury tax and wine equalisation tax liabilities under extended estimates and director penalty regimes.

Meanwhile, in schedule 4 to the bill, the ATO's powers are extended to retain tax refunds to cover all tax types, where the taxpayer has an outstanding tax lodgement that would affect the amount that would otherwise be refundable. This amendment assists the ATO in deterring and disrupting the core behaviours of phoenix operators by removing the loophole in the existing legislation.

There has been broad consultation with stakeholders on the policy and this legislation. Consultation on a discussion paper was conducted in 2017 and the consultation on the exposure draft was conducted in 2018.

It's clear these reforms build on a range of other actions the government has taken to combat illegal phoenixing and, more broadly, crime and fraud in the economy, including amending the insolvency practice rules to restrict the voting rights of certain creditors related to the phoenix company; increasing funding for the Assetless Administration Fund by $8.7 million over four years; increasing ASIC's ability to fund liquidators, who play a vital role in investigating and reporting illegal phoenixing activity; establishing a phoenix hotline to make it easy to report suspected phoenix behaviour to the ATO; establishing various task forces to tackle illegal phoenixing activities—the Black Economy Taskforce and the Serious Financial Crimes Taskforce being those bodies; introducing legislation to address the corporate misuse of the Fair Entitlements Guarantee scheme to protect Australian workers and limit the successive drain on the taxpayer funded scheme as a result of sharp corporate practices, including illegal phoenixing.

The bill also makes minor amendments to the government's already legislated insolvency reforms which form part of the National Innovation and Science Agenda and were aimed at encouraging a culture of business rescue for companies in financial distress. These amendments will ensure that these important reforms continue to operate as intended.

The bill was considered by the Senate Economics Legislation Committee, which recommended that the bill be passed. We will not be supporting those amendments that have been moved by the opposition or foreshadowed by the shadow minister. We don't think these 'worthy' changes—in the words of the shadow minister—should be held up for a much broader piece of important work led by this government with director identification numbers. The government is progressing a very ambitious agenda to ensure, through the Modernising Business Registers program, director identification numbers are put in place. This is explicit government policy. We welcome the shadow minister essentially foreshadowing bipartisan support of the Morrison government's policy with respect to director identification numbers but we certainly don't believe that these extraordinarily important amendments to tackle aspects of illegal phoenixing should be held up due to the more ambitious and larger work that will be done through the modernising business registers. I therefore commend the bill to the House.

Question agreed to.

Bill read a second time.

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