Warning phoenix law may burn innocent

Proposed laws that will soon come before Parliament will give the taxman powers to pursue directors who fall more than three months behind on superannuation contributions. The measures are designed to crack down on "phoenix" companies fraudulent companies that are deliberately liquidated to avoid paying staff entitlements.

However, Australian Institute of Company Directors chief executive John Colvin yesterday said the bill could punish directors who had done no wrong, as it applied to directors who joined a company after alleged breaches had occurred.

"At stake here are the fundamental principles that underpin the rule of law, and basic fairness 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 responded by saying existing laws can already make directors liable for debts incurred before their employment started.

As well, Mr Colvin said the proposal meant all the country's 2.1 million directors were at risk of being pursued, not just those of phoenix companies.

Assistant Treasurer Bill Shorten last month said 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," he said.

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