Shadow Assistant Treasurer Andrew Leigh has announced that, if elected, a Labor Government would “name and shame” directors of phoenix companies – those illegally/fraudulently ‘phoenixed’ – where directors and/or others deliberately leave companies unable to pay their obligations to employees and respective governments (which is estimated to cost the Australian economy as much as $5.1 billion). This would include:
- Allowing the Commissioner of Taxation to name individuals and entities as a penalty for the most serious tax offences.
- Give the ATO power to apply to the Australian Securities and Investments Commission (ASIC) to have them formally seek disqualification orders for directors who engaged in or oversaw serious non-compliance.
The director ‘disqualification order’ measure ‘dovetails’ the legislation which the Coalition Government has released in Draft Form, for consultation on 1 October 2018 – namely, to require directors of companies to be allocated, and register with: ‘Directors Identification Numbers’ (DINs) – see related Tax Technical Article. 100 points of identification material would be required, to get a DIN, like with bank accounts and the like.
Labor said the legislation for its “name and shame” tax penalty would mirror that for the Commissioner’s remedial power in Div 370 of the TAA53. The proposed tax penalty would require the Commissioner to make a disallowable legislative instrument notifying the public of the particular activity in which persons detected engaging in relevant behaviour will be named and shamed. Those activities would include:
- The Phoenixing activities already described; and
- significant global entities (SGEs) and their directors, in breach of Part IVA of the ITAA 1936 (which includes the MAAL and divert profits tax).
CPD questions (answers available)
- Is the measure foreshadowed, by Mr Leigh, giving the Commissioner the power to ‘name and shame’ directors of illegally phoenixed companies and also those guilty of the ‘most serious tax offences’?
- Will this power operate, like the Commissioner’s remedial power, in that he will have to make a ‘disallowable instrument’ (which has to be laid before Parliament and can be disallowed by Parliament) naming the particular the public of the particular activity?
- What is the Division # for the existing ‘remedial power’?
- To what other activity (other than phoenixed companies) might this disallowable instrument / name and shame power, extend?
- Would Mr Leigh also give the Commissioner the Power to apply to ASIC to disqualify Phoenix directors?
- With what related measure would disqualification of a director mesh?