In the Media

Combating Illegal Phoenixing – by Personal Liability for GST


The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was reintroduced into Federal Parliament on 4 July 2019.

According to the Explanatory Memorandum, the intended laws will:

  1. introduce new phoenixing offences that;

a) prohibit creditor-defeating dispositions of company property,

b) penalise those who engage in or facilitate such dispositions (directors, officers, facilitating advisers),

c) allow liquidators and ASIC new recovery options.

2. ensure directors are held accountable for misconduct by preventing improper backdating of resignations or ceasing to be a director when this would leave the company with no directors.

3. allow the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances.

4. authorise the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount the Commissioner refunds so as to ensure taxpayers satisfy their tax obligations and pay outstanding amounts of tax before being entitled to a tax refund.

While Illegal Phoenixing and the rise of unscrupulous pre-insolvency advisers and facilitators who promote such behaviour warrants strengthened Insolvency Laws, the Bill vastly increases the ATO’s powers  and this will affect all Australian businesses.

Specifically, point 3 will result in the most significant increase in the ATO’s recovery powers in over 25 years.

The Bill expands the Director Penalty Regime to include personal liability for unpaid GST, not just PAYG or super.

Of course, a director that causes their company to correctly report its liability within the 3 month window will still be able to have the Director Penalty remitted by paying or entering insolvency within 21 days of receiving a Director Penalty Notice.

The proposed law has been slammed as “shocking”, “unfair” and a “vicious attack” on the business community

In the Media

ASIC 2017/2018 Report on Insolvencies Just Released

ASIC has just released its Report on Insolvencies for 2017/2018.

84% of insolvencies involve small companies with:

  • 20 or fewer employees
  • Assets of $100,000 or less
  • 39% with liabilities less than $250,000
  • 61% with liabilities greater than $250,000
  • 97% of all small company liquidations result in a return to creditors of
  • Between 0 – 11 cents in the dollar
  • ASIC has not provided the % of matters where no dividend whatsoever is paid to ordinary creditors

Liquidators reported Insolvent trading by directors in 69% of all cases reported.

The top 3 indicators for insolvent trading reported by liquidators are:

  • 81% – the non-payment of statutory debts (PAYG, Super and GST)
  • 63% – difficulties paying debts over an extended period of time
  • 39% Financial Statements disclosing a serious history of shortage of working capital and unprofitable trading

Liquidators reported misconduct by directors/officers in 86.4% of cases (6,577 reports out of 7,613). The misconduct mostly complained of was:

  • 69% Insolvent Trading
  • 54% Failure to exercise care and diligence
  • 44% Failure to keep books and records

From these reports, ASIC requested liquidators provided 897 supplementary reports (13.6% of all reports alleging misconduct).

Of these supplementary reports, ASIC referred

  • 13% for compliance, investigation or surveillance
  • Of these matters referred
      • 25% were assessed as no further action required (for lack of evidence)
      • ASIC ‘no further action’ cases are retained for intelligence purposes.

The industries with the most judgements for liquidation are

  • 28% Other (business and personal services)
  • 22% Construction
  • 14% Accommodation and Food services


In the Media

All About Phoenix Transactions and Scams

Porsche, Range Rover and houses: How Nissan-driving Tim got caught in scam

But for the country lad, it was a decision that nearly destroyed his life.

Tim Batchelor with his lawyer leaving the Federal Court on Tuesday after giving evidence at the public examinations for companies linked to businessman Philip Whiteman.
Tim Batchelor with his lawyer leaving the Federal Court on Tuesday after giving evidence at the public examinations for companies linked to businessman Philip Whiteman.Instead of just receiving tax advice, Mr Batchelor had inadvertently walked into an allegedly $100 million phoenix scam run out of the offices of businessman Philip Whiteman.

Seven years later in 2016 when the tax office raided Mr Whiteman’s Richmond office in Melbourne, Mr Batchelor would discover that his identity had allegedly been stolen by his accountant and he had been made the director of no fewer than 10 companies without his knowledge.

The court heard the 10 companies borrowed heavily to buy a suite of luxury homes and cars before onselling them to other companies at knock-down prices – all without Mr Batchelor’s knowledge.

Mr Batchelor, from the Victorian town of Horsham, is now in dire financial and legal straits as creditors move to enforce the debts for companies he was never involved in, while the properties that was bought under his name – houses in inner city enclaves Elwood, Balaclava and Travancore, a beachhouse in Jan Juc, a $300,000 Porsche Panamera and a Range Rover – are long gone.

“I’m sorry, it’s just a bit overwhelming hearing all of this,” a clearly shocked Mr Batchelor said as he was presented with mortgages and car finance contracts with his name on them which he said he never signed.

“I drive a Nissan Navara,” he said.

Liquidators Andrew Yeo and Gess Rambaldi of Pitcher Partners are investigating allegations creditors, including the Australian Taxation Office, were ripped off when more than 360 companies were phoenixed by a suite of companies controlled by Mr Whiteman, either in his own name or, as the court heard this week, under one of his 28 aliases. The alleged scam includes creditors in NSW and Victoria.

Scores of dummy directors, people who are named as a sole director but have nothing to do with a business, have been unearthed as part of the investigation. Some are homeless, some are drug users and some are unemployed. Other dummy directors are financially struggling business owners who became clients of A&S Services for pre-insolvency advice or, in the case of Mr Batchelor, run-of-the-mill taxation advice.

Mr Batchelor told the court that in about 2012 he became suspicious after a series of creditors, including Westpac called in the loan for the Porsche, for debts of which he was unaware.

“I rang Mr Whiteman, he said give them (the creditors) his number and he would sort that out. He said it all must be one big mistake.

“He didn’t say anything about the properties or company directorships… The phone calls stopped (after I gave the creditors his number) and I was of the understanding that it was all a big mistake and it had all been dealt with.”

Mr Batchelor was also presented with an affidavit that had been filed in the Supreme Court of Victoria under his name which was filed in defence of a property claim brought against a company he had no knowledge that he was a director of.

The affidavit was filed by Toorak lawyer Jonathan Kenny of Kenny Kalus Intelex, who Mr Batchelor said had never been his lawyer, indeed he had never engaged a solicitor. Mr Kenny later appeared in court on Mr Batchelor’s behalf to defend the case allegedly without Mr Batchelor’s consent.

Mr Kenny will be called to give evidence at a later date. Mr Kenny was earlier this year cleared of contempt of court in a separate matter involving binary options trader One Tech Media.

Earlier on Tuesday, the court heard facilities manager Josh Nguyen was enlisted by Mr Whiteman to be a dummy director after driving his heroin addict friend to Mr Whiteman’s office to pick up $500 in cash.

However, Mr Nguyen told the court that while he had agreed to be a director of one company, he later learned he had been made a director of 11 companies without his knowledge.

With a clean credit rating, Mr Nguyen was told that by being a director he could assist other people who were struggling with bad credit ratings.

Soon Mr Nguyen’s mailbox was stuffed with company documents and notices from the tax office and creditors.

“I started to receive all of this mail for these companies… I never signed for these companies, I was never told about these companies and he kept on saying come on in and we’ll give you money for it.

“Every single day we were receiving more and more mail.”

He would later be told he faced a $1 million fine for unpaid company taxes.

It was similar situation for how bathroom fittings salesman Kevin Verapen became involved in the alleged scam.

Mr Verapen agreed to be a company director after visiting Mr Whiteman’s office to pick up his daughter from his then partner who worked with Mr Whiteman.

Mr Verapen told the court he consented to becoming a director of nine companies only to learn his signature had been forged and he was now a director of 27 companies including the head company of Mr Whiteman A&S Services.

Mr Verapen said that when the ATO raided the offices he demanded that he no longer be a company of A&S given he was not involved in the operations of the business.

Mr Verapen told the court that when he challenged Mr Whiteman about the troubles with A&S, Mr Whiteman said “you are the director, I am just a salesperson”.

“I didn’t know what he could do to incriminate more, although I was angry, I was wary about what he might be able to do. He could forge my signatures, what else could I do?”

In the Media

Collapse of book distributor strands hundreds

Collapse of book distributor strands hundreds

Dennis Jones & Associates has been the go-between for small publishers and self-published authors and bookstores since its formation in late 1991. It ceased trading last week and voluntarily appointed a liquidator.

Dennis Jones (left): a "passionate supporter of the small press network".
Dennis Jones (left): a “passionate supporter of the small press network”.

“It’s been pretty devastating for many,” said Juliet Rogers from the Australian Society of Authors, which is representing the interests of their members who are creditors as the liquidators arrange the orderly wind-up of the company.

“As I understand it from the liquidators there are 1300 creditors, most of whom will be tiny publishers and self-published individual authors.

“Dennis Jones was the only person willing to give them a go and although other players will pick up the best publisher lists, on the whole, the individual authors are going to suffer. It could also not have come at a worse time with Christmas just around the corner.”

Liquidator Steven Kugel of Insolvency Experts confirmed he was dealing with more than 1300 creditors, including one secured creditor and 15 employees, and around 500 debtors.

The role of the liquidator was to act for the benefit of all creditors including employees, secured and unsecured creditors, he said.

“In that regard, as liquidator, I will firstly deal with any assets of the company as well as obtaining books and records. Following that, I will undertake an investigation into the affairs of the company to determine the reasons for its failure … At this point, it will be decided if any dividend can be paid to creditors.”

Publishers that had placed books with the company for distribution were free to collect their stock, he said, as it is not considered a company asset.

Tim Coronel, general manager of the Small Press Network representing more than 120 small and independent book publishers, said many of its members had used Dennis Jones & Associates as their distributor for years.

“We were all shocked and saddened to hear that the company went into voluntary liquidation last week,” he said.

“Dennis and his team have always been passionate supporters of the small-press sector, working tirelessly to promote excellent books from small publishers and give them a chance at visibility and success in the mainstream.

“Many SPN member publishers will now have to find a new distributor. One positive that has already come from this unfortunate situation is the resilience and collegiality of the publishing community.

“Already half-a-dozen other distribution companies have offered to discuss the situation with affected SPN member publishers and we’re confident that many former clients of Dennis Jones will be able to make new distribution agreements soon.

“The transition period, however, will be challenging for these often very small businesses as they have a brief time-window to recover their stock from DJA and move it to new warehousing arrangements, with all the upheaval and expense that entails.”

Ms Rogers said she wasn’t sure of the reasons behind the collapse but “costs of the operation would have been high and the administration intensive”.

“I can only assume that it got to the stage where Dennis had no choice but to walk. He has had a long book trade career and it is not a decision he would have taken lightly.”

In the Media Taxation

Single Touch Payroll Program Lead at Australian Taxation Office

Source: John Shepherd via LinkedIn:

Single Touch Payroll is a game changer for tax and super reporting and the broader economy. It is an exciting digital initiative as it ultimately unlocks real time salary and wage information for all employees in Australia.

For now, it means employers will report payments such as salaries and wages, pay as you go (PAYG) withholding and super information to the ATO directly from their payroll solution at the same time they pay their employees.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018. The first year will be a transition, we are keen to help people make this change and accept that there needs to be a bedding in period while everyone gets used to this new process.

The Australian Government has also announced it intends to expand Single Touch Payroll to include smaller employers with 19 or less employees from 1 July 2019, subject to legislation being passed in parliament.

What will I need to do differently under STP?

Single Touch Payroll is a new way of reporting payroll information to the ATO. As you pay your employees through your own payroll process, you will be sending us their tax and super information at the same time.

This will align your reporting obligations to your usual pay cycle. In other words, you’ll be interacting with the ATO at the point where you pay your employees. This will typically be through your accounting or payroll software and the majority of software developers are already building updates into their payroll products to deliver Single Touch Payroll reporting.

When the ATO receives the payroll information, they’ll match that to your records, as well as your employees’ records. You won’t need to provide your employees with a payment summary if you have reported their information through Single Touch Payroll. The ATO will provide that to your employees through myGov or through their pre-filled income tax returns.

What’s next?

We’re working closely with our industry partners – including software providers and tax practitioners – to make sure the move to Single Touch Payroll reporting is a smooth one for everyone.

In the next month we’re also writing to employers with 20 or more employees to let them know about their reporting obligations from 1 July 2018 so they can start planning for Single Touch Payroll.

If you’d like more information you can visit

In the Media

Why Ignoring the Unlawful Conduct of Clients is a Bad Idea

Advisors who ignore unlawful conduct of clients may be exposed to penalties.

In a recent case, Fair Work Ombudsman v Blue Impression Pty Ltd & Ors [2017] FCCA 810, it was found that the external accountant knew of, but ignored, the underpayment of wages by their client. Consequently, the advisor was found to be an accessory to breaches of Section 550 of the Fair Work Act and now faces a potential liability of $378,000.

The problem involved a Fair Work audit of a restaurant business that found significant underpayments to employees.

The restaurant sought assistance from its accountant who calculated the correct pay rates, but the client did not update their systems with the correct rates.

A subsequent audit of the same business found the restaurant had not rectified the situation and had actually made further underpayments of wages, loadings, penalty rates, and allowances to its international workers.

As a result, Fair Work commenced legal action against the restaurant and its accountant on the basis that any third party involved in a contravention of the Fair Work Act, can also be taken to have breached the Act.

Naturally, the accountant claimed its role was that of a service provider processing payments in accordance with instructions and further, that it had no knowledge of employee duties or award rates that should be applied.

However, the Court determined that the accountant, with knowledge of the breach from the earlier audit, chose to ignore the underpayment and this was sufficient to be found an accessory to breaches of section 550. Doing nothing when you have knowledge of a client’s unlawful conduct is not a defence.

In the Media

ASIC warns Investors not to Engage with Skyllex

ASIC is warning the public not to use a website which promotes financial investments offered by ‘Skyllex’, a company incorporated in Australia.

ASIC is concerned that Skyllex’s website contains false, misleading or deceptive statements in relation to financial services.

The website states that ‘Our activity is totally legal and regulated by the Australian Securities and Investments Commission’.  Although Skyllex has been issued with a Certificate of Registration by ASIC, it does not have an Australian financial services (AFS) licence and it is not authorised by an AFS licensee to provide financial services.

Learn More

In the Media

Identity Thieves and Shady Scams Decimating Unsuspecting Australian Families

To his staff he was Tony Smith. To banks and financial authorities he was Tony Agius.

To investigators he appears to be little more than a puff of smoke left behind by someone who could be living in Asia, possibly Hong Kong or Beijing.

And to a growing list of consumers across the country who believed they were buying solar panels for their homes, he is the man who stole their savings.

The story of a million dollar-scam began in March when the real Tony Agius, of suburban south Brisbane, answered an online job ad seeking solar panel sales people.

Mr Agius provided a scan of his driver’s licence to his supposed new boss – crucially, someone he had never laid eyes on and who he only communicated with via email.

Days later, on March 28, the Australian Securities and Investment Commission registered a change in officeholders at a company called LG Energy Solutions Pty Ltd.

The sole director became Anthony Agius of Underwood in Brisbane.

According to its ASIC company extract, the address of LG Energy Solutions was level 27, 127 Creek Street in Brisbane’s CBD.

Alarm bells should have rung at the corporate regulator. The building only has 23 floors.

By April, LG Energy Solutions’ “Easter Sale” was popular in the booming market for rooftop solar and battery packages, a product heavily subsidised by the federal government’s solar rebate.

Calling himself Tony Smith, the man no one had seen hired sales staff over the internet on commission-only contracts to flog his “product”.

Read the entire story at the Sydney Morning Herald

In the Media

Australia’s Insolvency Expert Tackles Identity Theft

It was only a matter of time before the scourge of identity theft forced an insolvency practitioner to validate their appointment and Sydney liquidator Steve Kugel has recently been enjoying the inconveniences that flow from discovering an appointor is not who he seems.

Kugel was contacted on April 19 by a person identifying themselves as Tony Aguis, director of a company called LG Energy Solutions. Over the next couple of days Kugel and Aguis communicated electronically.

Aguis explained that he was in Hong Kong and wanted to place the company into liquidation. He told Kugel that the other directors of the company had recently resigned.

He also provided Kugel with details of creditors claims and documentation about proceedings initiated against the company by LG Electronics Australia. For the purposes of this tale SiN will call the plaintiff in those proceedings the Real LG.

Over the course of the week Kugel sought various information from Aguis.

He obtained a copy of a driver’s license but communication was intermittent and frequently unsatisfactory. The elusive Aguis, who claimed to be based in the Chinese capital, Beijing, blamed international telephony networks.

Kugel meanwhile took steps to confirm the identity of who he was dealing with. It didn’t take long for anomalies to emerge.

Read the story so far

In the Media

Investigation-free Liquidations – Good Idea?

The Government’s response to the Productivity Commission Inquiry into Business Set-Up, Transfer and Closure has just been released.

Recommendation 15.1 (page 27) is for a simplified small liquidation process for companies with debts of less than $250,000.

For such companies, the government supports:

1. A substantially reduced investigation into the control of a company and use of its funds;

2. A reduction of creditor participation in the liquidation process

To offset a reduced or non-existent investigation and presumably to allay creditor concerns, the government will require directors lodge a signed form with ASIC verifying the Company’s books and records are accurate.

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