“The Government will strengthen the tax law to counter fraudulent phoenix activity, which involves a company intentionally accumulating debts to improve cash flow or wealth and then liquidating to avoid paying the debt. The business is then continued as another corporate entity, controlled by the same person or group and free of their previous debts and liabilities.”
It is important that directors act now and review their company’s reporting and lodgment obligations associated with withholding amounts and superannuation payments in order to avoid substantial personal risks which may leave them exposed given the new proposed amendments. One must ponder the thought as to the extent to which director personal liability could eventually be extended. Possible future amendments to the proposed regime may even extend to include other withholding taxes such as GST liabilities. This would significantly increase director’s personal exposure. The tax man has stated that these funds are not part of a company’s funds and consequently should not be available for its cash flow. Such a position fails to recognise timing differences in working capital and may lead to many more cash flow issues than presently being experienced by the small to medium business sector. Questions also arise as to the implications for financiers and security holders as their ‘backup security’ in the form of personal guarantees may be eroded by more aggressive recovery activity by the Commissioner.
de Vries Tayeh has an exceptional working knowledge of the DPN regime as well as the proposed amendments outlined in the recent Federal Budget. de Vries Tayeh shall be able to provide you with accurate, timely and practical advice so as to obtain the best outcome for all involved.
For a private consultation, please contact our office reception on (02) 9633 3333 and ask to speak to any of the three partners Antony de Vries, Riad Tayeh or David Solomons.