Liquidating company avoid tax

Illegal phoenix activity hurts sub-contractors, creditors and employees as they are left unpaid and out of pocket.

It indirectly hurts the broader community because the company avoids paying tax and the government often has to subsidise outstanding employee entitlements.

Joe questioned the legality of the restructure, but Carlos assured him it was fine.

Carlos then appointed Joe as director of the new company and got an associate to value the assets of the old company for an amount well-below market value.

Work continued on existing projects and employees were unaware that they were employed by another company.

With no assets left in Sample Homes and minimal records, Carlos appointed a friendly liquidator who conducted limited enquiries about the cause of the company's failure and lodged a basic report to ASIC advising there were are no assets to recover that could be used to pay creditors.

His costs had blown out on major projects and he was unable to pay his suppliers, contractors, employees, loans and taxes.

Illegal phoenix activity is where a new company is created to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements.

This illegal practice usually happens when company directors transfer the assets of an existing company to a new company without paying true or market value, leaving debts with the old company.

Carlos prepared an Asset Sale Agreement to give the impression that Sample Homes (Vic) had purchased the assets legitimately.

Carlos had Joe sign the Asset Sale Agreement on behalf of each company and advised him not to pay the amount stated in the Agreement.

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Joe sought advice from his accountant, Trevor, who said he needed to take urgent steps to stop the company collapsing.

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