The ATO reported that, on 16 November 2018, a Western Australian business owner: Sung Jae Cho, was sentenced in the District Court of Western Australia, to five years and four months’ jail for fraudulently obtaining more than $890,000 through illegal phoenix activity. He was also ordered to repay the money he stole.

Mr Cho was convicted of 20 charges under the Criminal Code, including obtaining a financial advantage by deception between 2004 and 2007. The prosecution follows an extensive investigation by the Australian Taxation Office (ATO).

Between 1997 and 2009, Mr Cho operated a labour hire business through four different companies providing workers (mainly welders) to engineering construction companies in and around Perth.

Mr Cho’s business displayed the hallmarks of illegal phoenix activity, where he:

  • carried on a business through one corporate entity which intentionally accumulated but did not repay debts;
  • liquidated the business to avoid paying the debt; and
  • continued the business through a different corporate entity, which was still under his control.

He also failed to report and remit the goods and services tax (GST), and pay as you go withholding (PAYGw) while having sole and full control of the relevant entities.

Assistant Commissioner Aislinn Walwyn said illegal phoenix activity deprives employees of their entitlements, and disadvantages honest businesses by undercutting them on prices.

The ATO noted that:

  • we pursue those who try to gain an unfair advantage by avoiding their tax obligations – with the offending behaviour, in this case as long as a decade ago [you might think you’re home free, but … ].
  • This is a strong reminder to those involved in illegal phoenix activity, that if you engage in this behaviour you will get caught. We will continue to follow up phoenix operators despite their efforts to conceal their activities.”
  • The ATO is one of 32 Federal, State and Territory government agencies who work together as part of the Phoenix Taskforce to combat illegal phoenix activity.

FJM 2.12.18

[ATO website: Jail for WA Pheonixing; LTN 223, 19/11/18; Tax Month – November 2018]

 

CPD questions (Answers available)

  1. Was the WA business man sentenced to 5 years and 4 months jail for illegal phoenix activity?
  2. The charges, of which he was convicted, included what?
  3. Over what years did this behaviour occur?
  4. Was it only PAYGw that he didn’t pay to the ATO?
  5. Is it only the ATO who is disadvantaged by this sort of dishonest behaviour?

 

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