AICD says new Government laws fail to target phoenix companies

The Australian Institute of Company Directors (AICD) says the Government fails to target phoenix company operators with its new laws.

In a submission to Treasury, the AICD has reaffirmed its opposition to the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, saying the Government is over-regulating the majority of directors to target the few engaged in fraudulent phoenix company activity.

The Institute says the laws place all of Australia’s 2.1 million directors, including directors of small and family businesses, schools, hospitals and charities, at risk of being personally liable for a company’s unpaid superannuation guarantee amounts – regardless of the directors’ culpability.

John Colvin CEO of the AICD has called on the Government to confine the proposed legislation to instances where fraudulent phoenix activity is suspected.

“It largely imposes automatic liability on directors regardless of their culpability, and gives the ATO wide ranging powers in circumstances where directors are not suspected of dishonesty,” said Colvin.

“Of great concern, is the fact the Bill makes new directors personally liable for the actions of the company even when the person was not a director at the time of the company’s breach,” he said.

“We are firmly of the view that if new legislation is being introduced to target a specific problem, then the legislation must clearly define the issue sought to be addressed and specifically regulate that problem. If the Bill did this, and actually contained an appropriate definition of fraudulent phoenix activity and had the usual safeguards, we would be less concerned about its introduction.”

“It also fundamentally violates the rule of law, provides limited defences and reverses the onus of proof,” Colvin said.

The Government has allowed a consultation time of two weeks.

“We are of the view that such a consultation period is inadequate.”