ATO, Fair Work Ombudsman to be given new powers to pursue directors for abandoning workers

The Fair Work Ombudsman (FWO) and Australian Tax Office (ATO) will be given new powers to pursue company directors trying to skip out on paying their employees in the event of insolvency under laws that have passed the House of Representatives.

The reform, which is expected to pass through the Senate, aims to crack down on the misuse of the Fair Entitlement Guarantee scheme, which outlays the public purse for worker wages when businesses collapse.

Under the rules, new civil penalties will be introduced for workers to pursue their bosses, while the ATO, FWO and Department of Small Business and Jobs will be able to take action on behalf of staff.

The reforms also expand criminal sanctions to include those who may not have intended to prevent the recovery of employee entitlements.

The change is the latest move by the government to address illegal phoenixing and other similar activities in Australia — part of a black economy which has been estimated to cost the country between $1.8 billion and $3.2 billion each year.

It follows the release of draft legislation earlier this month that would see company directors required to sign up for unique identification numbers so they can be more easily tracked by regulators.

Cases where directors, or other company decision makers, avoid the payment of employee entitlements through illegal phoenix or the removal of assets from a company before it is wound up would be covered by the tougher penalties.

Company officers, managers and a “range of additional parties” can be held liable for prosecution.

The annual compliance cost of the legislation is expected to be $150,000, but will only target those engaging in what are called “sharp corporate practices”.