Government makes positive noises on DINs

Yesterday the Minister for Revenue and Financial Services announced the Federal Government’s intention to introduce a Director Identification Number (DIN) and a range of other measures to both deter and penalise phoenix activity.

Adopted from the great work of Prof Helen Anderson, the DIN was a policy position ARITA first adopted in 2014 in our Platform for Recovery paper. This was subsequently also taken up by the Productivity Commission.

While it isn’t a panacea, we are delighted to see the Government bringing this forward to assist liquidators in their work.

According to the Minister's media release , the following anti-phoenix measures are proposed as part of the package:

  • Specific phoenixing offences to better enable regulators to take action
  • The establishment of a dedicated phoenix hotline for reporting illegal phoenix activity
  • The extension of the penalties that apply to those who promote tax avoidance schemes to capture advisers who assist phoenix operators
  • Stronger powers for the ATO to recover a security deposit from suspected phoenix operators
  • Making directors  personally liable for GST liabilities as part of extended director penalty provisions
  • Preventing directors from backdating their resignations to avoid personal liability or from resigning and leaving a company with no directors, and
  • Prohibiting related entities to the phoenix operator from appointing a liquidator.

The Government is also proposing new preventative and early intervention tools that will apply to high risk individuals:

  • a next-cab-off-the-rank system for appointing liquidators
  • allowing the ATO to retain tax refunds, and
  • allowing the ATO to commence immediate recovery action following the issuance of a Director Penalty Notice.
We are broadly supportive of the other anti-phoenixing measures, but have already expressed our concern to the Government about the cab-rank approach to appointing liquidators. The Government has announced that consultation on the anti-phoenixing measures and how best to identify high risk individuals will commence shortly. ARITA will be involved in this process.

Members are welcome to provide any comments about the proposed reforms to the Specialist Team.