The Federal budget will also provide over $146 million in funding for the Australian Taxation Office to address fraudulent tax refund claims, monitor inaccurate grant payments and introduce a new measure that will see certain businesses forced to report payments to contractors.

These initiatives are estimated to provide the Government with a further $900 million in revenue over the next four years.

“What we want is a tax system that reinforces respect for government tax collection by not only being responsive to taxpayer needs, but by displaying effectiveness,” Assistant Treasurer Bill Shorten said in a statement.

Phoenix arrangements crackdown

The Government has bolstered current laws regulating phoenix activity, which occurs when companies avoid paying debts and charges – including taxes – by transferring assets from a collapsed business into a new one. The new business is operated or controlled by the same person or persons.

The new laws will see an expansion of the director penalty regime, which will now make directors personally liable for failing to pay superannuation to employees.

The ATO will also be awarded the authority to start recovery processes against directors under the penalty regime without the need for a 21-day grace period for liabilities left unreported for three months after they are due.

Moreover, in some circumstances directors and their associates will be stopped from obtaining credits for withheld amounts in their tax refunds if their company hasn’t paid enough to the ATO.

Fraudulent refund detection

The Government will provide $56.4 million over the next four years to crack down on fraudulent tax refund claims, with Shorten warning there is evidence the system is being abused by some who are claiming too much.

The money will be provided so the ATO can crackdown on over-reporting of tax losses before the actual refunds are issued, while funds will also be used for more business education and enforcement activities.

“Refund fraud is a compliance risk with the potential to undermine community confidence in the integrity of the tax system,” Shorten said.

Government grant and payments fraud

The Government believes some recipients of grants and other payments may not be aware of their tax obligations. Therefore $43.3 million is being handed to the ATO in order to clamp down on accurate reporting of grant payments.

While many Government grants provide full assistance to recipients, many are in the form of loans and need to be repaid over a certain period of time, depending on how much the original funding was.

Shorten says the ATO will continue with its data-matching practices to examine compliance activity.

“It is important that the recipients of Government grants and payments properly account for these payments,” Shorten says.

Taxable payments fraud

New money for taxable payments fraud is split into two parts, with the changes mainly aimed at contractors.

Shorten warns there appears to be some contractors either unaware of their tax obligations, or deliberately under-reporting them. As a result, certain businesses in the building and construction industries must report to the ATO annually on payments made to contractors, along with their ABN.

Just over $46 million will be provided to the ATO for this over the next four years, while some of the money will be used “to provide further assistance and education to industry”.

This requirement will come into effect from July 1, 2012, but Shorten says businesses will only generally be required to report information they already have anyway.

“The reporting regime will allow data-matching to provide information for review, targeted audits or further assistance and education,” Shorten says.

Public consultation will be underway during 2011-12 to investigate a reporting scheme made for contractors in the commercial cleaning sector.

Smart company article

At the same time, data shows a median-price house in Brisbane costs in excess of $102,554 more than a family on an average wage can afford.

The numbers paint a bleak picture ahead of the Premier’s delayed Building Revival Forum on April 12, which is being relied on by the sector to help drag builders out of the malaise.

UDIA Queensland president Warren Harris said the forum was critical to propping up the sinking sector, which has lost more than 17,000 full-time jobs since August 2008.

“Beyond any doubt the decline in industry activity is having a massive impact in Cairns, on the Sunshine Coast, in the Darling Downs and Wide Bay Burnett regions and, indeed, just about every locality throughout Queensland,” Mr Harris said.

“This latest update in the building activity should serve as further evidence that we need urgent outcomes from the forum we all know the problems, we now need solutions.”

Queensland has been the worst-hit state for the building industry since the GFC struck with force in 2008.

While 2011 appeared to promise better form than the past two years, instead approval numbers dropped a further 32 per cent in January to a 28-year low as far back as ABS records go largely due to widespread flooding.

That led to the loss of nearly 8000 jobs.

Those repercussions were felt strongest in the far north when one of the state’s largest builders, Glenwood Homes, fell into administration this month with debts of $30 million.

Founded by German-born Udo Jattke, who was once worth $300 million, Glenwood was forced to let go 24 staff with many houses partially built.

Regional modular home builder Nomad Building Solutions is another company that has felt the brunt of a tough season.

Chief executive Brett McDonald said issues from floods to the Japanese earthquake had made deals difficult to finalise.

“It’s been pretty tough and a lot of rain and other events here and overseas haven’t helped,” he said.

“With this level of negative sentiment around people aren’t keen to go out and buy a house.”

Nomad services individual buyers as well as commercial groups and mining firms, but said client support was beginning to sag.

The mum-and-dad market has tailed off, while the mining guys had a big stop over Christmas because of the flooding and deferred a lot of work,” he said.

Mr McDonald said he hoped the forum would look at extending the regional first-home buyer’s grant as well as focusing on government agency decentralisation.

It comes as Master Builders Queensland, which has led the push for insurance firms to employ local tradesmen in the disaster recovery, said there was mounting evidence that interstate workers were getting clean-up jobs.

News.com.au article

Banking figures show Australians used their credit cards an extraordinary 131 million times in July, more than in any previous

July and up 3 per cent on the year before.

People are also feeling freer about letting their debts run, owing $47.8 billion on cards in July, up 6.5 per cent, which works out at $3268 per card – up $159 per card from a year earlier. By contrast, in July last year, with memories of the crisis still raw, outstanding balances were down $16 per card on the year before.

Australians are feeling much more comfortable about using EFTPOS, too, pulling out cards at supermarkets and the like 193 million times, up 15 per cent on July last year, more than offsetting a drop from 72.2 million to 71.2 million in ATM withdrawals.

Although more money is running through EFTPOS terminals than ever before – almost $13 billion in July – the amount spent per transaction has fallen; an average of $56.24 in July, down from $58.80.

And people are increasingly using EFTPOS terminals as banks, withdrawing a record $1.3 billion in July. The average withdrawal for ”cash out” transactions climbed from $58.20 to $60.90.

”These are tentative signs consumers are starting to spend once again,” a Commonwealth Securities economist, Savanth Sebastian, said. ”The three rate hikes in March, April and May took a toll on household budgets, but the conservatism is thawing. The Reserve Bank needs to allow it to bloom.”

Lending figures also released yesterday show Australians to be more cautious when borrowing for houses, but increasingly carefree when borrowing for cars. A total of $847 million was borrowed for cars in July, up 16 per cent on a year before. By contrast, loans to buy houses were down 21 per cent and loans for alterations and additions were down 19 per cent.

Loans for the construction of houses remain at 17-month lows and commercial construction loans have now slumped to seven-year lows.

Businesses are expanding borrowing slowly: commercial loans were up 4 per cent in the year to July after sliding 17 per cent in the year to the previous July.

The $30 billion lent to businesses in July remains less than half the $64 billion lent in July 2007, at the height of the previous mining boom.

Smh.com.au

Confidential bank files reveal several cases involving breaches of consumer laws and industry guidelines by the ANZ’s debt collections department.

They include phone harassment and the inappropriate issuing of legal threats and default notices to debtors who have already agreed to make a repayment or face financial hardship.

The files support claims by bank insiders that the breaches may be systemic and fuelled by a relentless drive to maximise debtor repayments.

Bank insiders recently contacted the Australian Consumer and Competition Commission, which begun examining their claims several weeks ago.

An ANZ spokesman said its debt collectors had breached ”compliance obligations” in ”a small number of isolated cases” but denied it was systemic.

In another case, NAB debt collectors threatened a woman, despite knowing another woman with a similar name was responsible for the debt. After the case was raised with the NAB yesterday, the bank said the woman’s legal fees would be refunded.

Last July, five staff in the ANZ debt collection department were disciplined after it was revealed they had been involved in setting up a bogus Facebook page to track debtors.

The conduct of the debt chasers working for the ANZ and NAB has prompted calls for better oversight and regulation of debt collection, which annually attempts to recover about $6 billion from an estimated 12 million accounts.

Banks are yet to implement recommended changes to their code of conduct, including one which would ban the practice of seizing lump sums from accounts belonging to financially disadvantaged debtors whose other accounts are in arrears.

The ANZ files reveal this practice is being implemented despite evidence it will leave the debtor without enough money for essentials such as food or rent.

The files show one debtor had more than $1500 frozen in his savings account by an ANZ staff member, despite telling the bank he would be evicted.

Another debtor, who was unemployed and facing home-loan repayments, was also initially ordered by a debt collector to pay his debt in full or make a sizeable repayment, despite his obvious financial hardship.

In a third case, an ANZ debt collector planned to take the ”full balance” of a debtor’s personal account despite a promise by the debtor to make repayments.

The bank files also reveal an attempt to force a debtor to hand over half of their Centrelink welfare payment, a move which may breach federal laws.

Loan contracts permit banks to recover debts by taking money from borrowers’ other accounts. But ACCC guidelines require debt collectors to make ”reasonable allowance for a debtor’s ongoing living expenses”.

The breaches were raised internally last year with senior ANZ staff, prompting the bank to retrain some staff and issue edicts about appropriate behaviour.

The ANZ said it was ”aware of a small number of isolated cases where we have not met our compliance obligations”. These had all been investigated and changes made, a spokesman said.

SMH article

A PENSIONER’S family has blasted banks for approving “crazy” credit after he was granted a $70,000 spending limit.
Pauline Stubbs says she only discovered her husband Alec’s extraordinary line of credit – and $36,000 debt – when opening his mail while he was being treated for cancer in hospital.

“I nearly died,” Mrs Stubbs said.

“How in the hell could they think a pensioner could really afford this? We are not secret millionaires.

“Even if he asked for this, don’t they check into people’s circumstances before they throw money around?”

Former wharfie Mr Stubbs, 72, has been on a pension for several years.

Despite this, his ANZ card has an astonishing $46,000 limit. His Commonwealth Bank card has a $25,000 cap.

In a stunning turnaround, the ANZ agreed to wipe the $18,600 debt on its account after being approached by the Herald Sun and investigating. Bank spokesman Stephen Ries conceded it was a mistake to approve a credit limit of that magnitude.

The Stubbs own a modest home in Yarrawonga, Victoria, and both receive a $485 fortnightly aged pension.

Mr Stubbs’ deteriorating health and confusion has left him unable to properly explain his finances.

Mrs Stubbs said they had kept mainly separate bank accounts for most of their 53 married years, and she was in the dark about his monthly minimum repayments attracting interest and running into hundreds of dollars.

The couple had enough savings “to cover our funerals and bury us”.

“He has his bills and I have mine. We haven’t been living lavishly,” she insisted.

Consumer Action Law Centre spokeswoman Nicole Rich said hundreds of other pensioners had racked up ridiculous credit limits in the past decade.

Tighter regulations introduced last month meant lenders now had to do full assessments for every credit extension, but this only judged whether customers could repay minimum amounts.

“Plenty of people end up trapped because they pay off only the minimum for many years with no real hope of ever paying off the full amount,” Ms Rich said.

“We think customers should be assessed on whether full debts can be repaid within two years.”

The ANZ account opened in 2001 when Mr Stubbs was listed as retired and on a small income. His limit ballooned to $46,000 by 2007.

ANZ spokesman Stephen Ries said: “It’s clear this customer’s credit limit should not have been increased to this extent, and due to the exceptional circumstances we have decided to clear this debt to ensure the family is not placed under any additional stress at this time.

“However, we encourage any customers that find themselves in financial hardship to contact us early so we can help them work their way through the situation.”

Article excerpts news.com.au

Read more: http://www.news.com.au/money/money-matters/banks-lend-crazy-70000-to-pensioner-whose-income-is-485-a-fornight/story-e6frfmd9-1225907087169#ixzz0x0ZvMNnz

The draft legislation is an attempt to stop companies and directors engaging in phoenix activity.

The ATO estimates that the level of suspected phoenix cases may be in the order of $600 million and that this is an unacceptable risk to the governments revenue.

A phoenix transaction may be understood if one examines a typical situation.

A company called XYZ Pty Ltd has assets of $20,000 against liabilities of $200,000. It is clearly insolvent.The director, in survival mode has no funds but want to save his income source. Accordingly, he transfers all the assets of the company together with phone numbers staff etc into a new entity call XYZ (Aust) Pty Ltd.He transfers the assets for no consideration or for undervalue. By doing so, he leaves creditors with the shell of the old company but with all assets removed beyond their reach.

The ATO bond seeks to put a real price on such illegal activity for itself and creditors generally in that directors will lose more than their $1 share capital.

Section 255-100 of the proposed Bill says:

1.   The Commissioner may require you to give security for the due payment of an existing or future tax related liability of yours if:

a.    the Commissioner has reason to believe that:

i.    you are establishing or carrying on an enterprise in Australia; and

ii.   you intend to carry on that enterprise for a limited time only; or

b.   the Commissioner believes that the requirement is otherwise appropriate, having regard to all relevant circumstances.

The Bill gives the ATO power, at any time, to require such security deposits as the Commissioner considers appropriate.

It is expected that the ATO will use this power in high risk industries known to be at risk for phoenix transactions and against directors with a history of failed companies with large tax debts

Dr Kauye, 57, of Toorak, faces 64 counts of trading while insolvent under the Corporations Act, 18 counts of theft under the Victorian Crimes Act, and one count of providing false information in an affidavit to the Victorian Supreme Court.

ASIC alleges Dr Kauye allowed ICG to trade while insolvent between 25 July 2003 and 1 October 2004. ASIC specifically alleges that while ICG was insolvent Dr Kauye incurred debts to contractors and retail providers of approximately $160,000 and misappropriated approximately $1.5 million from US based companies.

This matter was initiated as a result of ASIC’s investigations and facilitated by funding from the Assetless Administration Fund.

Dr Kauye has been bailed to appear at a directions hearing on 26 July 2010 in the Melbourne Magistrates’ Court. The trial date at the Melbourne County Court is yet to be determined.

The Assetless Administration Fund (AA Fund) was established by the Australian Government and is administered by ASIC. It finances preliminary investigations and reports by liquidators into the failure of companies with few or no assets, where it appears to us that enforcement action may result from the investigation and report.

The disqualifications are a result of ASIC’s ongoing commitment to removing directors from managing companies after they have failed to fulfil their responsibilities relating to the proper running of the company, or after the company had been placed in external administration.

The actions taken by ASIC serve to protect future creditors, investors and employees who may otherwise be involved with a director who has a history of being involved in failed companies.

Three of the disqualifications resulted from the receipt of supplementary reports after further investigations were conducted by liquidators who had received funding through the Assetless Administration Fund (AA Fund).

The AA Fund was established to assist liquidators to carry out more detailed investigations into the circumstances of a company failure and to report, where appropriate, director misconduct to ASIC.

Details of the directors banned by ASIC between Jaunary 2010 and March 2010 are provided in the attachment to this advisory.

All the directors who were banned were afforded the opportunity to lodge an application with the Administrative Appeals Tribunal for a review of ASIC’s decision.

ASIC’s register of banned and disqualified persons can be found at www.asic.gov.au.

Background

Section 206F of the Corporations Act allows ASIC to disqualify a person from managing corporations for up to five years if, within a seven-year period, the person was an officer of two or more companies, and those companies were wound up and a liquidator provides a report to ASIC that the company is unable to repay its debts.

Mr Keith BARNES – banned for five years
Mr Keith Barnes, of Kew Victoria, was banned on 16 February 2010.

Mr Barnes’ disqualification followed an ASIC investigation into his role as a director of the failed companies, K & R Services (Aust) Pty Ltd and K & R Services (Vic) Pty Ltd. Both companies were involved in the equipment hire industry and failed with substantial outstanding liabilities including statutory liabilities to the Australian Taxation Office (ATO) and Victorian WorkCover Authority.

Mr Barnes was previously disqualified from managing corporations for a period of four years from 1992 to 1996.

ASIC’s investigation found that Mr Barnes allowed the companies to continue to incur debts despite the companies being insolvent and Mr Barnes failed to ensure that the companies’ books and records were adequately maintained.

ASIC was satisfied that the failure of the companies and a third company, K & R Services Pty Ltd, demonstrated that Mr Barnes had persistently failed in the management of corporations. Furthermore, ASIC was concerned that Mr Barnes regularly transferred assets from an indebted company to a newly formed company while continuing essentially the same business.

Mr Saviour Lawrence CAUCHI – banned for four-and-a-half years
Mr Cauchi, of Airport West, Victoria, was banned on 25 March 2010.

Mr Cauchi was banned following his involvement in two failed companies, Cauchi Cleaning Property Maintenance & Consulting Pty Ltd and Cauchi Cleaning Services (Aust) Pty Ltd.

ASIC decided that Mr Cauchi failed to act with care and diligence, or in good faith and for a proper purpose, or improperly used his position as director in relation to the transfer of the business of Cauchi Cleaning Services (Aust) Pty Ltd to Cauchi Cleaning Property Maintenance & Consulting Pty Ltd. The business was subsequently transferred to another related entity.

ASIC also decided that Mr Cauchi may have traded Cauchi Cleaning Property Maintenance & Consulting Pty Ltd whilst the company was insolvent, withdrew funds from the company for his own benefit or the benefit of family members, and overestimated the value of his properties which affected repayment of loan monies.

Mr Stephen George HALLETT – banned for two years
Mr Stephen George Hallett, of Boronia, Victoria, was banned on 16 March 2010.

Mr Hallett’s disqualification follows an ASIC investigation into his role as director of Willowbank Park Pty Ltd and Colonial Holdings (Australia) Pty Ltd, which were wound up in 2007.

Both companies failed owing significant amounts to creditors and the ATO. ASIC’s investigations confirmed that the companies failed due to a number of reasons, including poor financial control and poor strategic management. ASIC found that Mr Hallett had acted as ‘a front’ for another person who was unqualified to manage the companies. ASIC also found that Mr Hallett signed blank cheques, failed to ensure that income tax returns were lodged, failed to ensure that proper financial records were kept, and abrogated his responsibilities as a director.

Mr Mark Travis GOLDENBERG – banned for five years
ASIC has disqualified Mr Mark Travis Goldenberg, of West Leederville, Western Australia, from managing corporations on 23 March 2010. Please see ASIC Advisory 10-67 ASIC bans WA director for five years for further information.

Mr Jozsef HEGYVARI – banned for two years
Mr Hegyvari of Varsity Lakes, Queensland, was banned from managing corporations on 5 February 2010

Mr Hegyvari was the director of two corporations that have been wound up, Lifestyle Audio Visual & Automation Pty Ltd and Schaffer Investments Pty Ltd. A third failed company, ACN 007 794 952 (formerly HiFi Acoustics), was also taken into consideration by ASIC.

Each company was wound-up with significant deficiencies owing to creditors; collectively the deficiency totalled $1,758,198.

ASIC decided that Mr Hegyvari, as the director of these companies, failed to exercise due care and diligence in the performance of his duties and that two of his companies traded whilst insolvent. In addition, Mr Hegyvari failed to lodge documents in compliance with statutory duties.

ASIC was satisfied that Mr Hegyvari did not demonstrate that he exercised the requisite attentiveness and responsible conduct as a director and or officer of these companies.

Mr Ferdinand John LOTTER – banned for two years
Mr Lotter of Banyo, Queensland, was banned from managing corporations on 29 March 2010.

Mr Lotter’s disqualification followed an ASIC investigation into his role as the director of two corporations that have been wound up, GDR Systems Pty Ltd and ACN 082 942 354 (GDR). ASIC decided mismanagement and poor financial control, including lack of records, contributed to the company’s failure.

The companies were wound up with significant deficiencies owing to creditors; collectively the deficiency totalled $2,477,091.

ASIC decided that Mr Lotter failed to keep proper books and records to adequately explain the companies’ transactions. It was further decided that Mr Lotter failed to ensure that GDR did not trade whilst insolvent.

Mr Goldenberg’s disqualification followed an ASIC investigation into his role in four failed companies, Mortimer Close Pty Ltd (Mortimer Close), Terra Firma Capital Pty Ltd (Terra Firma), Concentric Private Wealth Management Pty Ltd and Concentric Accounting Pty Ltd. These companies were placed into liquidation between 7 October 2008 and 12 March 2009.

Mr Goldenberg was also a director of Concentric Financial Planning Pty Ltd, which is currently in liquidation, and Concentric Wealth Management Pty Ltd (CWM), to which receivers were appointed.

ASIC found that Mr Goldenberg failed to understand the role and duties of a director, or failed to perform adequately his duties as director having regard to:

• the size of deficiencies in the companies at the time of liquidations
• the value of outstanding liabilities including the failure to pay taxation debts
• the lack of proper records
• poor management of the companies by Mr Goldenberg.

Mr Goldenberg has the right to lodge an application with the Administrative Appeals Tribunal for a review of ASIC’s decision.

Background
On 26 September 2008, ASIC suspended the Australian Financial Services (AFS) Licence of CWM following the appointment of a receiver and manager. Mr Goldenberg was CWM’s sole director.

On 12 March 2009, the Federal Court ordered the appointment of a liquidator to Mortimer Close. Mr Goldenberg was Mortimer Close’s sole director.

On 19 May 2009, ASIC permanently banned Mr Goldenberg from providing financial services, and cancelled the AFS licence of CWM. Mr Goldenberg was formerly employed as an authorised representative of CWM.

ASIC’s investigation into Mortimer Close and Mr Goldenberg is continuing.

ABC, which at its peak had almost 2200 centres in four countries, also had a flawed strategy to handle “significant and rapid growth”, the administrators wrote in a creditors report released yesterday.

“There was inadequate focus on the day-to-day practices and results of the business operations”.

The report also confirms that related entities are making claims against ABC include former chief executive officer Eddy Groves who is seeking $3.3 million in a claim for unpaid wages.

The administrator will hold a public examination next month at which time Mr Groves will be asked questions about the affairs of the company and his conduct as director.

The administrator has been running a public examination in Federal Court since December.

Examinations last week revealed that new management believed a scheme using contractor invoices helped overstate profits.

The administrator’s report also indicated there “may be” unreasonable director-related transactions and voidable transactions and highlighted that a director could be ordered to pay damages if insolvent trading occurred.

The administrator preliminary view is “………….that ABC became insolvent during the first half of 2008,”.

ABC, which catered for children aged from infants to school age, suspended trading in its shares in August 2008.

The administrator’s report states its directors advised that it had become apparent ABC could not pay debts when they fell due on November 1 and 2, 2008.

The report of the administrator said that ABC, which listed in 2001 with only 43 centres, pursued a rapid expansion “without a strategy of successful integration of the businesses being developed and acquired”. Occupancy levels were too low and labour costs rose significantly.

Another alleged problem was a “dependence upon compensation payments, liquidated damages and fee guarantees from developers to provide revenue streams”.

“As the operating cash flow of the business was insufficient to fund the ongoing acquisitions and the availability of additional debt and equity became scarce, the business model was unsustainable.”

ABC owed almost $1.6 billion when it collapsed.

Article excerpts news.com.au