by Roslyn Cossins

According to figures recently reported by ATO staff at a forum for insolvency practitioners, the Deputy Commissioner of Taxation (“DCT”) has over 52,600 insolvency accounts with a combined debt of over $7.2 billion. It is no surprise, therefore, and especially to those who work within the insolvency industry, that the DCT is arguably Australia’s largest unsecured creditor.

So how does the DCT approach insolvency, and how can insolvency practitioners work with the ATO to achieve the best outcome for all stakeholders?

The DCT is quite often not only an active creditor, but also a significant participant in personal and corporate administrations. This is evident in the approach taken to creditor meetings, where the DCT’s staff quite frequently ask many pertinent questions, not only bringing facts to bear for their own information, but also for ‘less experienced’ creditors who may not know which questions to ask.

The DCT has also, understandably, taken an interest in supporting the integrity and fostering public confidence in the insolvency process. In this regard, a risk management approach is taken to safeguard independence of insolvency administrations, by identifying issues and risks, and acting when appropriate.

Whilst conceding that it is only a minority of insolvency practitioners who do not act with integrity, of particular concern to the DCT is when a Voluntary Administrator is appointed during winding up proceedings in an effort to frustrate the process, the DCT will ordinarily seek to replace the Voluntary Administrator particularly under the following circumstances:

  1. the company is no longer trading;
  2. the company’s operations have been transferred to another entity;
  3. there are concerns surrounding the independence of the Voluntary Administrator;
  4. excessive administrator fees are sought;
  5. where there are unnecessary delays in proceedings;
  6. there a significant number of related party creditors; and
  7. where the DOCA proposed is unrealistic.

So what can an insolvency practitioner do to avoid being replaced by the DCT when winding up proceedings are on foot? The DCT has expressed an interest in working collaboratively with practitioners to achieve better outcomes for all stakeholders and the first step in doing just that is for the appointed practitioner to engage early with the DCT through the DCT’s legal representative (if one is appointed) to notify them of the appointment as soon as possible. This is seen favourably by the DCT, and affords the opportunity to discuss the conduct of the administration, in particular, areas of concern that the DCT would like investigated.

At the end of the day, and what would behove all insolvency practitioners to keep in mind, is that the DCT is a creditor who is potentially shifting away from a compliance focussed agenda to being a creditor who wants to recover the debt owed to them and to know that the matter at hand has been investigated thoroughly by a reputable practitioner.

To everyone else, the DCT is a creditor who is evolving to be the voice for inexperienced creditors and a creditor that should not be taken lightly when dealing with issues outside of a formal insolvency appointment. The DCT is utilising their full suite of weaponry including garnishee, director penalty and winding up powers now more than ever.

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