Illegal phoenix activity
Learn how to identify and report illegal phoenix operators and how Revenue NSW is working with other agencies to combat phoenix activity.
New payroll tax grouping for illegal phoenix operators
The NSW Government amended grouping provisions in the Payroll Tax Act 2007 in September 2023 to reduce lost revenue from illegal phoenix activity. For more details and examples read payroll tax grouping for illegal phoenix operators.
What is illegal phoenix activity?
Phoenix activity is the deliberate and systematic liquidation of a company with the fraudulent or illegal intent to:
- avoid tax and other liabilities, such as employee entitlements
- continue the operation and profit taking of the business through another trading entity
- gain unfair advantage over other businesses.
Not all business failures involve illegal phoenix activity. Genuine business failures can still occur even when that business has been diligently managed by its directors.
In many instances the directors will try again and restart the business. They can operate the same business using another company without engaging in illegal phoenix activity. This is sometimes referred to as a ‘company restructure’.
Read more about how illegal phoenix activity differs from typical business failures on the following web sites:
If your business is struggling to pay its debts and at risk of insolvency, read about your options on the insolvency page.
How to identify phoenix operators
The ATO has published a range of warning signs that will help you identify and avoid possible phoenix operators.
You can view this information on their illegal phoenix activity page.
How to report illegal phoenix operators
If you encounter a person or a business who appears to be a phoenix operator, or is promoting illegal phoenix behaviour, we encourage you to report it.
We can penalise those who promote illegal phoenix schemes, including directors and intermediaries. Read payroll tax grouping for illegal phoenix operators for more details.
Please report to Revenue NSW first. We also recommend you report to the ATO. If you wish to report to the ATO their details are below.
Report to Revenue NSW
We take all reports seriously and you may report anonymously.
To report illegal phoenix operators or promoters:
Please note, while we take tip-offs extremely seriously, we are unable to provide you with updates on any action or outcome due to privacy laws. Read our privacy statement.
Report to the ATO
To report illegal phoenix operators or promoters:
For more information read the making a tip off page on the ATO website.
Why you should report illegal phoenix operators
Illegal phoenix operators do not pay their share of tax. This means less funding for essential services provided to communities by the State Government.
When a business intentionally operates in this way, there is a significant impact on those they have engaged or provided services to.
Estimates of the cost to the Australian economy exceed $2.85 billion annually.
Adverse business outcomes
- Our research suggests that most liquidation matters result in no dividends to unsecured creditors.
- Contractors engaged by the phoenix entity may not receive full payment owed to them.
- Vendors that provided good and services to the phoenix entity may not be paid in full.
- Employees engaged by the phoenix entity may lose unpaid entitlements. This is estimated by ASIC to be an annual loss of $298 million.
- Other businesses engaged with may be in financial difficulty as they have not been paid by phoenix operators.
- By avoiding their taxation obligations, phoenix operators can lower their operating costs and prices, gaining an unfair competitive advantage over businesses doing the right thing.
What is Revenue NSW doing to combat illegal phoenix activity?
Revenue NSW is part of the Phoenix Taskforce. This taskforce comprises federal, state and territory agencies working together to combat illegal phoenix activity.
We use targeted strategies, such as:
- conducting data matching with other agencies
- conducting audits
- imposing higher penalties
- pursuing unpaid payroll tax debts
- pursuing unpaid payroll tax debt through directors of the business
- monitoring known phoenix operators to ensure they meet their statutory obligations.
Revenue NSW seeks to persecute illegal phoenix operators to the full extent of the law.
We work with other agencies to ensure maximum penalties such as fines, criminal convictions and imprisonment are enforced.
Read more about our involvement in the Phoenix Taskforce.
Contact the payroll tax team
If you have questions about this topic call 1300 139 815 or +61 2 7808 6904 for international callers.
You can also email [email protected]