Insolvency and phoenix activities

Phoenix activity is the fraudulent act of transferring the assets of an indebted company into a new company to avoid paying creditors, tax or employee entitlements. The new company, usually operated by the same director, continues the business under a new structure to avoid their responsibilities to their creditors.

The Australian Securities and Investments Commission (ASIC) and the Australian Tax Office (ATO) have powers to combat fraudulent phoenix activity. The ABCC refers allegations of potential fraud to these agencies for investigation.


An insolvent company is one that is unable to pay its debts when they become due. If a company is in financial difficulty, it may be placed into external administration. Where a sole trader (who conducts business in their individual name, rather than in the name of a company) encounters financial difficulty, they may face bankruptcy.

External administration is a term that covers all types of insolvency arrangements for companies in financial difficulty. External administrations include voluntary administration, receivership or liquidation. For more information on the different types of insolvency and the rights of customers, employees and suppliers of an insolvent business, you should consult the Australian Securities & Investments Commission (ASIC) website Link opens external website in new tab.

Liquidation of an insolvent company enables an independent and suitably qualified person called a liquidator to take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of creditors.

Fair Entitlements Guarantee

If employees lose their job because their employer has entered bankruptcy or liquidation and there are insufficient funds available to pay their outstanding entitlements, they may be able to get financial help under the Fair Entitlements Guarantee (FEG).

FEG applies to unpaid employee entitlement claims for all employer insolvency events that occurred on or after 5 December 2012. For more information visit the FEG website Link opens external website in new tab, call the FEG Hotline on 1300 135 040 or email feg [at]

The General Employee Entitlements and Redundancy Scheme (GEERS) continues to apply to unpaid employee entitlement claims for employer insolvency events that occurred before 5 December 2012. For more information call the FEG Hotline on 1300 135 040 or email feg [at]

Employer superannuation contributions are not covered by FEG or GEERS. For key superannuation information, visit Link opens external website in new tab or contact the Australian Taxation Office (ATO) on 13 10 20.

Reporting fraudulent phoenix activity      

If you suspect that a company or its directors may be engaging in fraudulent phoenix activity, you should consider the information about what you can do about phoenix activity provided by ASIC Link opens external website in new tab and the ATO Link opens external website in new tab, or contact ASIC on 1300 300 630 or the ATO on 1800 060 062.

The ATO have specific powers to counter fraudulent phoenix activities. These include:

  • making directors personally liable for their company's failure to pay certain tax or employee superannuation obligations
  • commencing recovery against directors for certain unpaid company liabilities that remain unreported after three months of becoming due
  • the prevention of directors and associates of directors from obtaining credits for withheld amounts in their individual tax returns where the company has failed to pay withheld amounts to the ATO.

ASIC also maintain a register of banned and disqualified persons who are not allowed to work as a director of a company due to their previous activities. More information on the banned and disqualified register is available from the ASIC website Link opens external website in new tab.                                    

Need more information?

For further information, advice or assistance please contact the ABCC on 1800 003 338 or enquiry [at]