The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2019 (Cth) (Amending Act) passed into law on 17 February 2020, over a year after it was first introduced to Parliament.
Placing phoenix activity firmly in its crosshairs, the Amending Act introduces long anticipated reforms to Australia’s efforts to curb phoenix activity.
Background
In its recent decision in the ongoing Solar Shop litigation,[1] the Full Federal Court established two key principles which will have significant ongoing implications for the conduct of unfair preference claims:
Who should read this eBrief:
- Company directors
- Accountants
- Financial Advisors
Proposed changes to Commonwealth legislation could have a significant impact on the potential for transferring assets out of one company into a new company to avoid paying liabilities.
If enacted, the changes will give liquidators, ASIC, and the ATO new powers to prosecute culpable directors and associated persons.
Winemakers can run into significant tax problems after transferring their businesses to a company or trust structure. While income tax relief may be available on the transfer of the business assets, many winemakers and their accountants fail to realise that such restructures can eliminate or substantially reduce a winemaker’s entitlement to the Wine Equalisation Tax rebate. For winemakers who are heavily reliant on the WET rebate for profitability and cash flow, overlooking such consequences can be disastrous.
It’s tempting for a company director to not respond to a liquidator’s request to produce financial records if they contain incriminating material, but is it wise?
Increasingly, formal restructures, whether solvent or insolvent in nature, are closely aligned to court-supervised processes, adding certainty and transparency to the restructuring process.
The Commissioner of Taxation (Commissioner) recently issued draft taxation determination TD 2019/D2 (TD 2019/D2) dealing with the important question of a receiver’s obligation to retain money for post-appointment tax liabilities. A link to TD2019/D2.
Australia’s corporate insolvency laws are in a process of significant change.
The latest proposed reform concerns the controversial practice of “phoenixing”. In recent months and years, phoenixing has attracted attention from a wide band of Australian regulators.
The Phoenixing Bill
High Court orders the liquidation of CBL Insurance
In line with measures announced in the 2018 Federal Budget, the government has released a package of proposed insolvency reforms: Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2018, Insolvency Practice Rules (Corporations) Amendment (Restricting Related Creditor Voting Rights) Rules 2018 and accompanying explanatory material, for consultation. Consultation concludes on 27 September.