Summary
AUSTRAC’s financial intelligence helped authorities convict a business owner who was carrying out illegal trading known as ‘phoenixing’ to evade company tax and fund his lifestyle and gambling.
What to look out for
- Frequent, high-volume ATM cash withdrawals.
- Transfer of large cash amounts from business accounts into personal accounts.
- Large cash withdrawals at casino ATMs.
The crime
An Australian Taxation Office (ATO) investigation identified an offender who was carrying out illegal trading known as ‘phoenixing’. This involves creating a new company to continue the business of a company that has been deliberately liquidated to avoid paying its debts.
Over a 12 year period, the offender operated a labour hire business through four different companies, mainly providing welders to engineering construction companies in Western Australia. After the ATO wound up the first company for non-payment of Goods and Services Tax (GST) and Pay-As-You-Go withholding (PAYGW), the offender created the second company.
Once again, he failed to report and pay GST and PAYGW, then abandoned the company without paying its debts and created the third company. He repeated this process to create a fourth company.
To distance himself from the companies, the offender installed family members and associates as directors. He claimed to be managing the business on behalf of these directors and earning a salary of around A$41,000 a year.
AUSTRAC’s analysis of financial data showed that over a number of years the offender had made several significant cash withdrawals totalling A$1.8 million from ATMs, including an A$650,000 cash withdrawal from ATMs at a casino. He also transferred A$831,000 from business bank accounts into his personal credit card accounts and other non-company bank accounts.
He was charged with three counts of dishonestly causing a loss and 17 counts of obtaining a financial advantage by deception.
Penalties
The offender was found guilty of all charges. He was sentenced to five years and four months’ jail, and ordered to pay A$890,112 to the ATO.
How business reporting helped
Several financial institutions submitted suspect transaction reports and significant cash transaction reports to AUSTRAC following large cash withdrawals by the offender.
AUSTRAC’s role
Our analysis of the data submitted by reporting entities helped authorities prove that the offender was using business income from the companies under his control to fund his lifestyle and gambling activity while evading tax.
This guidance sets out how we interpret the Act, along with associated Rules and regulations. Australian courts are ultimately responsible for interpreting these laws and determining if any provisions of these laws are contravened.
The examples and scenarios in this guidance are meant to help explain our interpretation of these laws. They’re not exhaustive or meant to cover every possible scenario.
This guidance provides general information and isn't a substitute for legal advice. This guidance avoids legal language wherever possible and it might include generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.