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Contractors of Sample Homes who did not get paid then complained to ATO via the ATO Tip-Off form (Phone: 1800 060 062) as they suspected illegal phoenix activity.
After an investigation by ASIC and the ATO, Joe was charged with breaching his director duties obligations under the Corporations Act and was imprisoned for 2 years.
Once the assets are transferred to a new company, the directors continue to operate the business.
This gives the new business an unfair advantage when competing for work, because they carry less debt and have lower operating costs.
Trevor introduced Joe to Carlos, a pre-insolvency adviser who offered to restructure the business for ,000.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.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.