{{ propApi.closeIcon }}
Our industry
Our industry $vuetify.icons.faArrowRight
Housing industry insights Economics Insights Data & forecasts Tailored research and analysis Advocacy & policy Advocacy Policy priorities Position statements Submissions News and inspiration Industry news Member alerts Media releases HOUSING Online
Business support
Business support $vuetify.icons.faArrowRight
Become an apprentice host Hire an apprentice Why host a HIA apprentice? Apprentice partner program Builder & manufacturer program Industry insurance HIA Insurance Services Construction works insurance Home warranty insurance Tradies & tool insurance Member perks Toyota vehicles The Good Guys Commercial Fuel savings See all Planning & safety solutions Building & planning services Safe Work Method Statements (SWMS) Solutions for your business Contracts Online Advertise jobs Trusted support & guidance Contracts & compliance support Industrial relations
Resources & advice
Resources & advice $vuetify.icons.faArrowRight
Building it right Building codes Australian standards Getting it right on site See all Building materials & products Concrete, bricks & walls Getting products approved Use the right products for the job See all Managing your business Dealing with contracts Handling disputes Managing your employees See all Managing your safety Safety rules Working with silica See all Building your business Growing your business Maintaining your business See all Other subjects Getting approval to build Sustainable homes See all
Careers & learning
Careers & learning $vuetify.icons.faArrowRight
A rewarding career Become an apprentice Apprenticeships on offer How do I apply? Frequently asked questions Study with us Find a course to suit you Qualification courses Learning on demand Professional development courses A job in the industry Get your builder's licence Continuing Professional Development (CPD) Further your career Find jobs
HIA community
HIA community $vuetify.icons.faArrowRight
Join HIA Sign me up How do I become a member? What's in it for me? Mates rates Get involved Become an award judge Join a committee Partner with us Our initiatives HIA Building Women GreenSmart Kitchen, bathroom and design hub Get to know us Our members Our people Our partners Support for you Charitable Foundation Mental health program
Awards & events
Awards & events $vuetify.icons.faArrowRight
Awards Awards program People & Business Awards GreenSmart Australian Housing Awards Awards winners Regional Award winners Australian Housing Award winners 2024 Australian Home of the Year Enter online Industry events Events in the next month Economic outlook National Conference Events calendar
HIA shop
HIA shop $vuetify.icons.faArrowRight
Most popular products National Construction Code Vol 1 & 2 Waterproofing wet areas AS 3740:2021 HIA Guide to Waterproofing HIA Guide to NCC Livable Housing Provisions Top categories Building codes & standards Contracts & documents Guides & manuals Safety products Signage For your business Contracts Online Digital Australian Standards Digital Resource Library Forecasts & data
About Contact Newsroom
$vuetify.icons.faTimes
$vuetify.icons.faMapMarker Set my location Use the field below to update your location
Address
Change location
{{propApi.title}}
{{propApi.text}} {{region}} Change location
{{propApi.title}}
{{propApi.successMessage}} {{region}} Change location

$vuetify.icons.faPhone1300 650 620

Corporate phoenixing

This policy sets out HIA's position relating to illegal corporate phoenixing and calls on government to define the practice and to have appropriate controls in place that do not unduly disadvantage businesses operating in good faith.

HIA’s Position statement

Illegal phoenixing activity creates an uneven playing field and represents an inefficiency in the construction industry which leads to a misallocation of resources, additional costs and lower productivity.

  1. The Australian Government should make it an offence to deliberately and systematically liquidate a corporate trading entity with the fraudulent or illegal intention to:
    • avoid tax and other liabilities, such as employee entitlements; and
    • continue the operation and profit taking of the business through another trading entity.
  2. The offence should be extended to advisors and those facilitating phoenixing activity with fraudulent or illegal intent.
  3. Incorporation is a legitimate business arrangement and must be preserved:
    • It is a fundamental principle of company law in Australia (and elsewhere) that a company is a separate legal entity, independent of its directors and shareholders.
    • Adopting a corporate structure should continue to be regarded as an appropriate risk management strategy to respond to project and business risk.
  4. The offence of illegal phoenixing should not extend to a company, director and/or an officeholder if the behaviour was directed at legitimate business rescue.
  5. Existing regulatory powers to manage corporations should be enforced including measures that would improve directorships transparency and visibility over an individual’s history of involvement with corporate entities.
  6. Educating the industry and community on activities associated with illegal phoenixing activity should be a priority.
  7. Regulators should target those that engage in certain phoenixing behaviours to assist education, compliance and enforcement activities.

Background

  • Illegal corporate phoenixing is a persistent public policy problem that has widespread negative impacts on the economy.
  • Phoenixing will be illegal when there is deliberate and systematic liquidation of a company with the fraudulent or illegal intention to avoid tax and other liabilities. The business then continues to operate and take profit through another entity, disclaiming any responsibility for the debt of the previous company.
  • While the majority of business failures and insolvencies in the residential building industry are not caused by deliberate intent or design, according to ASIC data, the ‘construction’ industry is largely represented in the overall number of insolvencies across the economy, with almost a quarter of all business failures coming from the sector.
  • In light of this and increasing pressure on the Commonwealth to take action on illegal phoenixing and the potential impact future policies or legislation may have on residential building companies, HIA developed a position statement in relation to Corporate Phoenixing.
  • The challenge for governments looking to regulate in this space is that it is impossible to distinguish between legitimate business rescue and intentional activities to avoid legal liabilities. It is important to balance the potential risks of legislation inappropriately applying to those engaged in appropriate business practices. Not all company failures will involve illegal phoenix activity and genuine company failures do occur.
  • A difficulty in responding to government measures and proposals is that there is no legal or statutory definition of ‘phoenix activity’. The problem with developing a definition resides partly in the fact that phoenixing, of itself, is not inherently unlawful unless it is undertaken with malevolent intent in which case a range of broader generic criminal law sanctions may be applicable.
  • Harmful phoenixing activity, left unchecked, has the capacity to undermine Australia’s revenue base and the competitive ‘level playing field’. It is foreseeable that legitimate business operators, paying taxes, wages and other debts, might be driven out of business by those engaging in illegal phoenix activity.
  • While it is difficult to quantify its impact, according to the Fair Work Ombudsman and PwC, the cost of illegal phoenix activity is estimated to be in the range of $2.85 to $5.13 billion, with the estimated direct cost on business being between $1,162 – $3,171 million per year.
  • Illegal phoenix activity represents an inefficiency in the construction industry which leads to misallocation of resources, additional costs and lower productivity.
  • HIA does not support individuals who engage in illegal corporate phoenixing.

 

Policy endorsed by HIA National Policy Congress: 23 May 2019

Share with your network:
More articles on:
{{ tag.label }} {{ tag.label }} $vuetify.icons.faTimes
Find the latest expert advice, guides and much more!
HIA Advocacy
View all $vuetify.icons.faArrowRight
08 Jul
National Urban Policy Consultation Paper

HIA provided a submission to the National Urban Policy – Consultation draft and note that the development of the Policy aims to outline the Government’s goals and objectives to enable urban areas to be liveable, equitable, productive, sustainable and resilient.

05 Jul
Impacts of Climate Risk on Insurance Premiums and Availability

HIA provided a submission to the Senate Select Committee on the Impacts of Climate Risk on Insurance Premiums and Availability.

05 Jul
Proposed Development Scheme for the Woolloongabba priority development area

HIA provided feedback in relation to the proposed Development Scheme for the Woolloongabba Priority Development Area.

02 Jul
Review into the Design and Building Practitioners and Residential Apartment Buildings Act 2020

HIA provided a submission on the Review into the Design and Building Practitioners Act 2020 and the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020.

28 Jun
HIA response to Impact Analysis of Condensation Management Stage 3

HIA responded to an ABCB submission on the Impact Analysis of Stage 3 Proposals for Condensation Management NCC 2025.

28 Jun
HIA response to Impact Analysis of Proposals for Waterproofing in NCC 2025

HIA responded to an ABCB submission on the Impact Analysis of Proposals for Waterproofing in NCC 2025.