Landmark case for ATO strips phoenix enabling liquidator of his registration

THE Federal Court has disqualified Sydney man David Iannuzzi from practising as a registered liquidator for a period of 10 years.

This is the first time the ATO has initiated Federal Court proceedings using Corporations Act provisions to take on the facilitators of schemes designed to avoid paying tax.

The Federal Court found that Mr Iannuzzi, as the sole director of Veritas Advisory Pty Limited, had been systemically negligent in his responsibilities as a liquidator over an extended period of time and across more than 23 companies.

The Federal Court found that Mr Iannuzzi’s "systemic conduct was certainly reckless; it fell very far short of the conduct that was to be expected of him; it demonstrates that he failed to observe the obligations of candour on him with regard to disclosing relevant circumstances to creditors; it reflects poorly on his character; and it demonstrates that he is not a fit and proper person to remain registered as a liquidator".

ATO Assistant Commissioner Aislinn Walwyn said the outcome demonstrated that the ATO will take firm action to hold facilitators of illegal phoenix activity to account and take steps to remove them from the business environment where they have acted negligently.

“Our taxation and superannuation systems rely on the integrity of industry professionals, including insolvency practitioners,” Ms Walwyn said.

Illegal phoenix activity is when a company is deliberately liquidated, wound up or abandoned to defeat creditors, leaving its debts behind. Its assets are shifted to the controllers or to a new entity that begins trading, often under a similar name.

“Illegal phoenix activity affects the whole community. It rips off creditors and employees and reduces the amount of revenue that could be collected to fund essential community services,” Ms Walwyn said.

A report by PricewaterhouseCoopers in 2018 estimated the economic impact of potential illegal phoenix activity to be up to $5.13 billion per year. This includes small businesses and individual contractors or suppliers who are left unpaid, employees who haven’t been paid their entitlements, and all Australian taxpayers who ultimately bear the burden of unrecovered tax debts left behind by phoenix activity

The ATO leads the 37-member Phoenix Taskforce, which aims to protect public finances, as well as honest businesses and employees, by deterring and reducing illegal phoenix activity.

lllegal phoenix activity can be reported at www.ato.gov.au/tipoff or phone 1800 060 062.

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