Government crackdown on dodgy companies ripping off employees and creditors

THE federal government is planning a comprehensive crackdown on dodgy companies set up to rip off employees and creditors.

EXCLUSIVE

COMPANY directors could be given identification numbers and face massive personal fines in a government attempt to crack down on “illegal Phoenixers” who set up dodgy businesses.

News Corp Australia can reveal the government has received a report from the Phoenix Taskforce charged with looking into the issue that wipes $3.2 billion from the economy and rips more than $600 million from the pockets of employees in lost wages each year.

Illegal Phoenixers are company directors whose entire business model is to rake in as much money as possible before declaring insolvency, leaving employees and suppliers without wages and paid invoices.

Once their prior business is liquidated and has had all assets and cash stripped from it, they then set up another business with the same model and continue the cycle.

The dodgy business owners don’t limit themselves to one area of the economy, however the phenomenon is particularly rife in the construction industry.

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Kelly O'Dwyer is planning a crackdown on dodgy businesses. Picture: AAP

Among the recommendations being considered by government include forcing all company directors to receive a Director Identification Number (DIN) so they can be pursued for any lost wages, invoices or superannuation and prevented from being an Illegal Phoenixer. Improving the requirements to become a company director and forcing GST on sales — particularly on sales of houses — to be paid to the Australian Taxation Office at the time of sale so there is an inventory of money in case the company goes bust are also other recommendations being considered.

The crackdown could restore between $1.8 to $3.2 billion to the economy each year including $650 million to employees for lost wages and super and $600 million to the government bottom line.

Financial Services and Revenue Minister Kelly O’Dwyer said she was looking “very carefully” at the recommendations presented by the Phoenix Taskforce.

“There is no one silver bullet in addressing this issue,” Ms O’Dwyer said.

“This has been an issue over a long period of time and there are going to be a number of measures that are going to be needed to tackle it.”

Dodgy businesses are particularly rife in the construction industry. Picture: AAP

Ms O’Dwyer said the dodgy businesses taking part in this type of activity were leaving a trail of destruction in their wake.

“This is a serious economic issue that affects a lot of lives,” she said.

“This is right through the economy and it’s impacting a lot of players.

“The truth is people can set up companies very easily in Australia. That is a great thing and we are not looking to make that more difficult, however this behaviour needs to be stamped out to make it an even playing field for all.”

Originally published as Government crackdown on dodgy companies ripping off employees and creditors