This article discusses the taxation-related aspects of the recently released federal government’s consultation paper, which sets out proposals to combat illegal phoenixing activity in Australia. The author questions whether powers proposed to be given to the Commissioner of Taxation to recover tax liabilities from companies in financial distress may be used in a manner that discourages businesses from making genuine restructuring efforts to avoid winding up pre-insolvent companies for the long-term good of their employees and other creditors, including the Australian Tax Office. While the prevalence of phoenixing in Australia is calling out for a legal solution, the author concludes that the reforms should be approached with circumspection.