The ATO is seeking amendments to its powers with the introduction of the Draft Tax Laws Amendment Bill 2010 that will give the ATO discretionary power to demand security deposits from businesses as part of securing likely or expected tax obligations.
The draft legislation is an attempt to stop companies and directors engaging in phoenix activity.
The ATO estimates that the level of suspected phoenix cases may be in the order of $600 million and that this is an unacceptable risk to the governments revenue.>
Section 255-100 of the proposed Bill says:
The Commissioner may require you to give security for the due payment of an existing or future tax related liability of yours if: (a) the Commissioner has reason to believe that: (i) you are establishing or carrying on an enterprise in Australia; and (ii) you intend to carry on that enterprise for a limited time only; or (b) the Commissioner believes that the requirement is otherwise appropriate, having regard to all relevant circumstances.
The Bill gives the ATO power, at any time, to require such security deposits as the Commissioner considers appropriate. It is expected that the ATO will use this power in high risk industries known to be at risk for phoenix transactions and against directors with a history of failed companies with large tax debts.