In a recent decision of the New South Wales District Court, a Sydney business man was sentenced to six years in jail and ordered to pay $1.8 million in reparations, after he was convicted of tax fraud relating to illegal phoenix activity.
On 25 January 2019, the court found that Benjamin Ensor had fraudulently lodged false Business Activity Statements on behalf of nine companies he was sole director of between 2008 and 2011. Ensor subsequently used the money obtained from this practice to fund the development of five luxury apartments in Manly and to purchase a bevy of luxury items including a catamaran, a marina at Lake Macquarie and a new home.
It was also revealed that Ensor structured his companies to fraudulently obtain GST credits, reporting his business expenditure at more than $24 million in order to claim over $2.2 million in GST refunds. In doing so, Ensor created false invoices relating to project management services and high value excavators, trailers and trucks.
He also failed to report the sales of the Manly apartments on which he should have paid more than $1.5 million.
Ultimately, the ATO alleged that Mr Ensor’s actions saw him defraud the Commonwealth of $3.4 million.
The decision follows increased efforts to curb illegal phoenix operations, with ATO Assistant Commissioner Aislinn Walynn declaring that this case exhibits classic illegal phoenix behaviour, in which “companies were deliberately liquidated to avoid paying creditors and taxes”, whilst “new companies continued operating the same or a similar business with the same ownership.”
In doing so, she declared that the “result demonstrates the ATO’s commitment to detecting and prosecuting the most egregious tax crimes and should serve as a warning to those who think they can flout the law and get away with it.”
Wiebke Herrmann is a Director at James Conomos Lawyers where she practices in the areas of insolvency, bankruptcy and commercial litigation. If you or your business needs assistance navigating a legal dispute, please do not hesitate to contact her.
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