Q. Establishing the scale and cost of phoenix activity?

In 1996, the Australian Securities Commission (ASC, now ASIC) quantified the annual loss to Australian businesses due to phoenix activity as $670 million to $1.3 billion.

This is likely to have increased significantly as the ATO reports that phoenix activity has been on the rise amongst larger businesses.

In order to ensure that the quantification was robust and defensible, a model was constructed that draws, as much as possible, on existing data. Where there was not reliable data, assumptions have been made based on feedback from stakeholders. Due to the uncertainty surrounding these assumptions, lower and upper bound estimates were used in the quantification. The assumptions were also subject to a range of sensitivity tests.

Based on this method, it is estimated that phoenix activity costs Australian employees $191 to $655 million per annum and the overall impact of phoenix activity is estimated as $1.78 to $3.19 billion per annum.