Labour Hire Authority (LHA) works closely with the ATO and other government agencies under the national Phoenix Taskforce to stamp out illegal phoenix activity across the labour hire sector.
Phoenixing – where a company is liquidated, wound up or abandoned to avoid paying debts, with a new company started to continue the same business activities – harms both workers and the community:
- Employees miss out on wages, super and entitlements.
- Legitimate businesses are put at a competitive disadvantage.
- The community loses out on revenue that could contribute to community services.
LHA has refused applications and cancelled licences where we believe illegal phoenix activity to be taking place.
Consequences of illegal phoenix activity
LHA recently investigated a matter where a company changed its office-holders multiple times over a short period without informing LHA. This gave rise to significant concerns that the relevant persons were engaged in illegal phoenix activity.
One director had previously run two companies that had entered external administration in the last five years. This meant they were no longer fit and proper to serve as a relevant person. There were deliberate attempts to conceal the director’s identity from LHA.
LHA cancelled the company’s licence because they failed to let us know about the change of directors, or that a relevant person was not fit and proper, within 30 days as the Act requires.
Ung Services Pty Ltd and Nico Keat were recently fined over $480,000 on similar grounds after LHA’s successful prosecution in the Supreme Court.
To be compliant with the Act, licence holders must inform us when their business details – such as the identity of directors – change. You must also tell us if a relevant person for the business is not fit and proper. Failure to do so within 30 days can result in serious consequences. Update these details using your LHLO account.
Spotting the signs
Labour hire hosts should look out for potential signs of illegal phoenixing by providers, such as:
- regular changes to company names, directors and ABNs, especially while the key contact person remains the same
- businesses quoting labour hire services at prices below what is possible to comply with their legal obligations to workers.
Labour hire workers should look out for these red flags:
- not receiving a payslip, or being paid cash-in-hand
- being paid less than the lawful minimum wage
- not receiving superannuation or other entitlements
- payslips recording a different employer name.
Providers should also be wary of dishonest advisors who take advantage of struggling businesses by offering bad advice.
If you come across suspected illegal phoenix activity by a labour hire provider, please notify LHA by using our Report a Problem form or by calling 1300 545 200.
For further information about phoenixing, visit the ATO website.