The agriculture sector is heavily affected by illegal phoenix labour hire firms that deliberately go into liquidation, leaving debts behind, harming honest contractors and ripping off workers by not paying their entitlements and super.

Illegal phoenix activity occurs when a company is deliberately liquidated to avoid paying its debts, including creditors, employee entitlements and taxes. The business then continues to operate as a new company, often with the same or similar name.

If a business uses a labour hire firm to recruit staff and it is later phoenixed, the business (and even the directors) could face liability for the phoenixed company’s debts and the directors may even face criminal charges.

The Phoenix Taskforce, led by the Australian Taxation Office (ATO), is currently targeting illegal phoenix businesses to protect honest agricultural businesses and workers.

If you use a labour hire firm to hire your staff, you should be on the lookout for illegal phoenix warning signs. Some of the most common warning signs include:

  • If you are dealing with the same contractor as last year, but they are now trading under a different company name or using a different ABN.
  • If the controller of the company is not the director, who is instead (for example) a spouse or family member.
  • If the controller of the company has previously been associated with liquidations or de-registrations of companies. You can do an internet search or ASIC search to check.
  • If the controller asks you to direct payments to new or different different bank accounts.
  • If the entities’ tax and super lodgments are not up-to-date.
  • If the entities’ quote is unrealistically low – for example, if they could hardly be making a profit after paying employee wages and entitlements.

Before engaging a labour hire firm, make sure they have a proven record of paying debts and employee entitlements. You can ask them for proof that the company is compliant with its tax obligations and check if any directors or persons in control have ever been bankrupt, or if companies they have previously controlled have entered receivership or have been liquidated.

For more details on how to spot a phoenix operation, what you can do to protect yourself and what consequences you could face for using using an illegal phoenix company, take a look at this flyer, which we shared in the May/June 2018 edition of Vegetables Australia.

This information has been provided by the ATO. For more information, see the ATO website. Queensland growers should also refer to the Labour Hire Licensing Queensland website.

This post appeared in the AUSVEG Weekly Update published 29 May 2018. Subscribe to the Update using our online form to receive the latest industry news in your inbox every week!