Directors query bill to stop phoenix frauds

Proposed laws to come before Parliament will give the taxman powers to pursue directors who fall more than three months behind on super contributions.

The bill is designed to crack down on fraudulent "phoenix" companies - firms that are deliberately liquidated to avoid paying staff entitlements.

However, the chief executive of the Australian Institute of Company Directors, John Colvin, said yesterday the bill could punish innocent directors who joined a company after alleged breaches had occurred.

"At stake here are the fundamental principles that underpin the rule of law ... this bill tramples all over presumption of innocence and due process," Mr Colvin said.

"We're supportive of efforts to reduce fraudulent phoenix activity, but in its current form, the bill could punish individuals who have had nothing to do with real or perceived transgressions. This is like punishing a driver for the driving offences of the car's previous owner."

Government sources said existing laws could hold directors liable for debts from before their employment.

Mr Colvin said the proposal meant all 2.1 million directors were at risk, not just those of phoenix companies.

This was echoed by the Australian Chamber of Commerce and Industry, which said the bill did not seem to target phoenix companies.

The Assistant Treasurer, Bill Shorten, said last month there were between 7500 and 9000 directors who would be liable under the legislation, citing estimates there were 6000 phoenix companies in Australia.

"The amendments balance the importance of ensuring employees receive their entitlements and deterring phoenix activity, against the need to ensure entrepreneurialism and commercial risk-taking is not discouraged," Mr Shorten said.

The Association of Superannuation Funds of Australia backed the changes, saying the retirement savings of thousands of workers were suffering due to phoenix activity.