Small business body, AICD welcomes delay on phoenix company bill

The Council of Small Business Organisations of Australia and the company directors’ body have welcomed the Government’s decision to postpone the introduction of a bill targeting phoenix companies, saying the proposed legislation casts too wide a net and would deter directors from volunteering for not-for-profit and community organisations by making directors personally liable for unpaid super.

A Parliamentary committee this week recommended the Government defer the introduction of the Pay As You Go Non Compliance Tax Bill 2011 so it can be better tailored to focus on phoenix arrangements – attempts to evade tax through the deliberate, systematic and sometimes cyclical liquidation of related corporate trading entities. The Government has estimated there are about 6,000 phoenix companies, costing it about $600 million and putting a hole in workers’ super accounts.

In a bid to crack down on phoenix arrangements and the non-payment of super to employees, the bill proposed to extend the personal liability of directors to unpaid superannuation guarantee entitlements.

But COSBOA executive director Peter Strong says he was primarily concerned that the legislation was too broad.

“What they’re proposing is that every director in Australia is responsible for any super,” Strong says.

“Now, that might be okay for Centro and board members who get paid a lot of money, but that’s not okay for people who volunteer for a sports body or your local club board.”

“A lot of the volunteers are retired people, so all of a sudden these people risk losing their house.”

The Australian Institute of Company Directors, meanwhile, says although it supports the Government’s intention to crack down on phoenix arrangements, the legislation made directors liable for actions of the company that did not happen under their watch.

They say it also encouraged the ATO to drag their feet because the Tax Office could go after the directors’ private finances without sending out a penalty notice after the company stopped making super payments for three months.