The Australian Government has announced the introduction of a new Phoenixing Hotline that will help to protect the incomes of employees and small businesses.

Phoenixing is a term for companies that are liquidated in order to avoid paying their bills but which then reinvent themselves and start operating as another company.

“We are aware of contractors who are $200,000 out of pocket due to phoenix activity. That’s compounded by the significant stress and strain it causes, particularly on the smaller, family businesses who struggle to cover such a loss,” says National Electrical and Communications Association (NECA) chief executive Suresh Manickam.

“Unfortunately, phoenixing has been particularly prevalent in the construction industry, in which NECA’s members operate. It is a totally unacceptable and inequitable practice.”

A report prepared by Pricewaterhouse Coopers (PwC) for the Australian Taxation Office (ATO), Fair Work Ombudsman and the Australian Securities and Investments Commission (ASIC) estimates that illegal phoenixing cost the Australian economy between $2.9bn and $5.1bn in 2016-2017. Up to $3bn of this was born by businesses, such as sub-contractors, with employees missing out on wages and superannuation payments of up to $300m.

In addition to the new hotline, the Government has also announced a director identification number scheme, new phoenix offences and new penalties for misuse of the unpaid wage safety net.

“NECA welcomes any measures that will crack down and introduce more penalties on companies who undertake phonenixing,” says Suresh.

“We support all measures that better protect, and create greater security for electrical contractors, their employees and the apprentices who work for them – all of whom are particularly vulnerable to this unconscionable practice.”