'Phoenix' laws raise concerns

COMPANY directors remain unhappy with draft legislation designed to crack down on "phoenix company" operators, warning that the laws risk penalising honest business people to catch a few wrongdoers.

COMPANY directors remain unhappy with draft legislation designed to crack down on "phoenix company" operators, warning that the laws risk penalising honest business people to catch a few wrongdoers.

The concerns remain despite the government making a series of concessions on the proposed laws, which will make company directors personally liable for unpaid superannuation owed to their workers.

The draft legislation was originally released last year, but was pulled in November for further consultation after concerns were flagged by groups including the Australian Institute of Company Directors.

In a revised draft released late on Wednesday, the government revealed several changes to the laws, including that the Australian Tax Office would need to wait 21 days after serving a penalty notice on a director before it could start recovery action, when previously it could recover debts without serving a notice. The government also extended from 14 to 30 days the point at which a new company director would become liable for pre-existing superannuation debts.

Assistant treasurer David Bradbury said the laws made it clear that directors had an obligation to ensure their workers' super was paid, while also forcing "fraudulent directors" to be liable for unpaid super.

He said the measures struck "the appropriate balance between protecting workers' entitlements while not discouraging people from becoming company directors".

But an AICD spokesman said that although the institute was still reviewing the legislation, a key concern remained that the laws would apply to all Australian company directors, not just those suspected of phoenix activities.

"This bill is yet another example of where legislation designed to target a few creates an overly burdensome liability risk for the majority of directors who are honest, diligent and comply with the law," he said.

The laws form part of a series of measures aimed at cracking down on so-called phoenix companies failed businesses that are resurrected in a different guise by the same operators, thus avoiding paying debts to creditors and employees. Such activities cost the economy up to $2.4 billion a year, the ATO has estimated.

Submissions on the draft laws close on May 2, with the government hoping to pass the bill in the winter session of Parliament.

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