Regulators are probing eight of Australia’s largest big construction projects for the existence of phoenix scams and are preparing to file criminal charges.
The Tax Office, the Australian Securities and Investments Commission and the Fair Work Building and Construction inspectorate are co-operating on the problem of contractors sending their companies into liquidation to avoid debts to employees, the Tax Office and others. Phoenix scams are regarded as a serious problems facing industries with large numbers of short-term blue-collar workers, including construction, labour hire, meat processing and horticulture.
Consulting firm PwC estimated in 2012 the problem costs between $1.8 billion and $3.2 billion a year.
Big construction companies have agreed to provide financial information and documents about their contractors to the Tax Office, which is using it to identify sub-contractors breaking the law.
The regulators wouldn’t identify which companies are providing them with information, but they are likely to include Lend Lease and Leighton.
“Yes we are aware that the ATO and ASIC are investigating the issue of phoenix companies,” a Lend Lease spokeswoman said. “We work with the regulators as required.”
“The construction industry is the highest represented sector in illegal phoenixing activity,” said Brett Bassett, ASIC’s senior executive for small business compliance and deterrence.
“There are still a percentage of people who, even if they have had a knock on the door from ASIC, will still do the wrong thing.”
By liquidating front companies, owners avoid paying taxes and money owed to employees, including leave and superannuation. They transfer the collapsed company’s assets to a new company, which later repeats the process.
The owners reap big profits with little chance of being prosecuted, at least until now.
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