Illegal phoenix activity occurs when a company's assets are transferred to a new entity — at undervalue or for no consideration — with the purpose of defeating creditors, while the old company is left insolvent with its liabilities unpaid. ASIC has estimated that phoenix activity costs Australian creditors, employees, and the tax system hundreds of millions of dollars annually. With insolvency volumes elevated in 2026, the conditions that favour phoenix activity — financially stressed businesses with motivated directors seeking to preserve assets — are present at scale.
The legal framework against phoenix activity
The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) introduced several new tools:
- Creditor-defeating dispositions: a new voidable transaction category allowing liquidators to recover assets transferred at undervalue in the two years before administration or liquidation where the purpose was to prevent a creditor from recovering.
- Compensation orders: ASIC and liquidators can apply for orders requiring directors who have engaged in phoenix activity to compensate creditors.
- Director identification numbers (DINs): all directors must now have a DIN, reducing the ability to use false identities across multiple phoenix entities.
- ATO liability for employee entitlements: directors become personally liable for unpaid employee entitlements in phoenix situations.
Identifying potential phoenix activity
Warning signs that a debtor may be engaging in or preparing for phoenix activity:
- The same directors operating a new company with a similar name or trading purpose that begins active trading shortly before or after the original company ceases paying creditors.
- Reports that the original company has transferred customers, key employees, equipment, or intellectual property to a new entity.
- The original company continues to incur debts (ordering goods, engaging services) while the directors are known to be aware of its insolvency.
- Directors have a history (visible on ASIC searches) of involvement in multiple failed companies.
Protecting yourself as a creditor
- Check the director history of new customers before extending credit — multiple prior company failures is a significant risk indicator.
- If you suspect phoenix activity is imminent, act quickly: lodge a PPSR claim (if applicable), issue demand promptly, and consider applying to wind up the company to trigger a liquidator appointment before assets are moved.
- Report suspected phoenix activity to ASIC via their online reporting portal — ASIC's Phoenix Taskforce uses creditor reports to identify and pursue patterns of behaviour.
- If a liquidator is appointed, notify them of any suspected asset transfers and provide documentary evidence — a well-resourced liquidator can pursue creditor-defeating dispositions on behalf of all creditors.
Contact Merion if you suspect a debtor is engaging in phoenix activity — the window for protective action is often short.