The ATO just launched massive raids on tax agents suspected of phoenix activity

Photo: In Pictures Ltd./ Corbis via Getty Images.
  • Eleven premises hit by 250 ATO officers as part of an investigation into phoenix activity.
  • The focus is tax agents promoting avoidance of tax.
  • Phoenix companies arise from the ashes of a collapse, with the same people operating the business, leaving behind a trail of avoided outstanding payments to tax authorities, creditors, businesses, customers and employees.

More than 250 officers from the Australian Tax Office (ATO) supported by police raided eleven sites across Victoria as part of an investigation into alleged phoenix activity to avoid tax.

The raids at business and residential sites yesterday in Melbourne and Shepparton is part of a long-term investigation into phoenixing where companies are sunk and their assets resurrected in new businesses, leaving behind unpaid bills including tax obligations.

A study by PwC shows illegal phoenix activity is costing Australia up to $5 billion a year.

Last financial year the ATO sent out tax bills totaling more than $270 million from more than 340 reviews and audits of businesses involved in phoenix activity.

“We are examining a group of tax agents suspected of facilitating phoenix activity and promoting avoidance of tax involving GST, income tax and the failure to remit pay-as-you-go withholding tax payments,” says Deputy Commissioner Jeremy Geale.

“We suspect the agents have used phoenix techniques to assist clients to avoid paying tax on millions of dollars of income.”

The action was triggered by complaints from concerned tax professionals and clients as well as the ATO’s own intelligence.

Geale says the ATO rarely uses its formal access powers.

“We only use these powers in the most serious of cases, when taxpayers or their representatives refuse to engage with us within a reasonable period of time and where we believe there is a risk of records being moved or destroyed,” he says.

He says most tax agents do the right thing but there are a small number of agents who don’t.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.