Illegal phoenix activity occurs when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements. Illegal phoenix activity impacts employees, creditors, competing businesses and the Government, with direct costs estimated at between $2.85 billion and $5.13 billion for 2015–16.
Australian Government activities to address illegal phoenix activity date back to the 1970s and 1980s in relation to Bottom of the Harbour schemes. The first major intergovernmental arrangement occurred in 2011 with the establishment by the Australian Taxation Office (ATO) of an Inter-Agency Phoenix Forum to address illegal phoenix behaviour. This was not a prescribed taskforce for the purposes of the Taxation Administration Regulations and the ATO consequently faced considerable limitations in sharing information with other forum members about potential phoenix cases.
The Australian National Audit Office selected illegal phoenix activity for audit because the activity imposes considerable costs on the Australian community (estimated up to $5.1 billion for 2015–16), is a long-standing problem and requires extensive cooperation between government entities, which is often challenging to implement. The audit was intended to provide assurance on whether the Phoenix Taskforce is effectively addressing illegal phoenix activity at a whole-of-government level.
The audit assessed the effectiveness of the Phoenix Taskforce to combat illegal phoenix activities.
The audit criteria are:
- Does the Phoenix Taskforce have effective governance arrangements?
- Has the Phoenix Taskforce developed and implemented effective strategies and processes to combat illegal phoenix activities?
- Do the Phoenix Taskforce performance measurement arrangements enable it to assess effectiveness?