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Wednesday, 5 February 2020
Page: 151


Senator WATT (Queensland) (10:02): I'm very pleased to speak on the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019, which Labor is supporting, with some amendments. The practice of phoenixing is something I've spoken on quite a few times in this chamber because it is such a big issue in many parts of my home state of Queensland, particularly the Gold Coast, where my office is based.

Unfortunately, for whatever reason, it does seem that the Gold Coast and the Sunshine Coast are real hotspots when it comes to phoenixing activity. Already in my relatively short time in this parliament, there have been a number of very high-profile examples of phoenixing activity occurring—particularly on the Gold Coast and the Sunshine Coast but also in places like Rockhampton and many other parts of my state—that have seen building subcontractors, subbies, totally ripped off to the tune of millions of dollars. Homeowners, who've paid deposits, are also being ripped off by dodgy developers and dodgy building companies who simply don't want to pay their bills and move on from one company to the next.

It has been a really big problem, as I say, across many parts of Queensland and, no doubt, across the rest of the country as well. I have literally met building subbies who have lost their homes because of the bills that have not been paid. I've met subbies whose marriages have broken up because of the financial pressure that phoenixing has put on them. This government has been far too slow in responding to these problems. I've been raising these issues for as long as I've been here. There've been a number of other people on this side of politics who've been raising this for a lot longer than I've been here. I remember Senator Cameron, when he was here, was part of a Senate inquiry—and no doubt other senators were as well—which made recommendations to fix this problem. It was ignored by the government. And a number of other Labor figures, including shadow ministers, have been seeking action from this government for a long time. We're pleased that this is starting to happen in the form of this bill, but there's still a long way to go.

As has been mentioned by other speakers in this debate already, the practice of so-called phoenix activity, where dodgy directors deliberately strip companies of their assets and transfer assets to a related company before intentionally collapsing their business and thereby refusing or claiming to be unable to pay their bills—and it's done in an attempt to avoid obligations to employees, to government and to honest businesses—is estimated to cost the Australian economy more than $5 billion per year. So $5 billion per year is owed by dodgy directors and dodgy building companies to their employees, their subbies and the government—a lot of the time this involves tax bills that aren't paid by the people who owe taxes. Millions of dollars, in fact billions of dollars, are owed to homeowners who paid deposits and to a range of other people. That is a really massive impact on the Australian economy and on people. Marriages are breaking down. There are suicides, unfortunately, which occur from people being on the wrong end of this phoenixing activity and finding themselves in massive financial distress. So this has an economic impact and a really big human impact as well.

In my home state there are a number of places, particularly on the Sunshine Coast and the Gold Coast, which seem to be hotspots for phoenixing activity and subcontractor exploitation. It seems like not a week goes by in Queensland where we don't have another report of this kind of activity occurring.

While I think of it, I want to pay tribute to the efforts of Les Williams and the Subcontractors' Alliance, or subbies alliance. They're a band of subbies who've got together and got organised. They probably wouldn't like being likened to a trade union, but much like a trade union they're standing up for their rights. They have had a lot of success in putting this issue on the agenda in Queensland and getting the Queensland government—the Palaszczuk government—to respond with a number of major reforms. I want to commend the Palaszczuk government on what they've done in respect of this as well. Subbies alliance is continuing to get media coverage to put pressure on all levels of government to take more action. Unfortunately, there is still a long way to go. That's why we keep seeing examples of this phoenixing activity occurring.

One example I can give you from 2017 is the company called Queensland One Homes, which was put into liquidation by its directors. The collapse left 133 tradies and staff out of pocket by about $3.4 million. There were 35 would-be home owners who paid deposits for their homes and have been left in limbo.

This issue has impacted on people in this chamber. The former senator Bob Day's very own company, Newstart Homes, is another example of a company which has been shutdown while owing millions of dollars to suppliers, building workers, subbies and homebuyers who have paid deposits—they're never to see that money again. That kind of conduct is unacceptable. It's damaging to our economy and to our community. The Queensland government has taken steps to stop it, but the federal government simply needs to do more.

Just about every tradie in Australia will have experienced the frustration of not being paid on time or not being paid at all. We need to remember subbies aren't volunteers. They are running a business. They often have employees of their own they have to pay, and they should always be paid in full and on time. We hear a lot from this government—from members of the Liberal Party and the National Party, or the LNP, as it's known in my home state—claiming to be friends of small business. They're claiming to be the people who are standing up for small businesses against big business and against government, but here's a form of small business—building contractors—being left in the lurch, suffering from phoenixing and not being paid, and this government has been prepared to sit idly by and not take action to protect them. It's about time our LNP members of parliament stop saying that they care about small business while doing nothing in response and stop going soft on corporate crooks and start listening to the subbies who are getting ripped off by these people. We've got to close loopholes that are allowing these businesses to take advantage of subbies.

Turning to this bill, which Labor will be supporting as a good first step to tackling this problem, schedule 1 to the bill introduces new phoenixing offences to prohibit creditor-defeating dispositions such as transfers of company assets for less than market value or the best price reasonably obtainable, penalise those who engage in such dispositions and allow liquidators and ASIC to recover such property.

The provisions set out in schedule 2 are aimed at preventing directors and officers from an insolvent company from avoiding personal liability.

This will reduce the incidence of illegal phoenixing activity and its impact on employees, creditors and government revenue. Schedule 3 allows the commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for the company's GST liabilities in certain circumstances. Finally, schedule 4 authorises the commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information that may affect the amount the commissioner refunds. This ensures that taxpayers satisfy their tax obligations and pay outstanding amounts of tax before being entitled to a tax refund.

This bill has been subject to a Senate inquiry conducted by the Senate Economics Legislation Committee. Stakeholders, for the most part, supported the bill, but many did note that the government's primary focus should be on amending and enforcing existing legislation, not on developing new, complex legislative amendments and offences. There were also concerns that the proposed measures within the bill are likely to have limited impact, as they are highly technical and will not substantially expand ASIC's power to combat phoenixing.

I might end on that note in relation to ASIC. I think many of us have been frustrated by ASIC's seeming inability to take proper action against companies which are engaging in this kind of conduct. I have asked ASIC about this at Senate estimates hearings, and I know other people have as well. The response that we're always given is that they simply don't have the resources to do the policing job that the government and the community expect them to do. We know that ASIC has limited resources and is unable to pursue all of the reports of corporate misconduct that it presently receives from administrators and liquidators, pursuant to various sections of the Corporations Act. Without additional funding and staffing, it's difficult to see how ASIC will be able to pursue to their full potential the new powers it is being given under this bill. The government simply has to act to ensure that ASIC has the ability to support more difficult court cases without draining the corporate watchdog's resources.

In summary, this bill is a good start. We will be supporting it. We will be proposing amendments. It is high time that this government started taking this issue of phoenixing seriously. I have met too many people in the Gold Coast, the Sunshine Coast, Rockhampton and other parts of the state who have lost their business, who have lost their home and who have lost their marriage because they have been ripped off by dodgy developers and dodgy builders. We've been asking the government to act on this for years. The Subcontractors Alliance has been asking for the government to act on this for years. Ordinary men and women in Australia have been doing so as well.

If this government is serious about being a friend of small business, here is a category of small business that really needs help. They simply don't have the bargaining power to fight for themselves in court to get back what they are owed. They don't have the legislative power to do so either. They need the government to step in and the government regulators to have the proper resources to be able to take action and enforce the laws that already stand on the legislation books.