Recently a controversy has developed concerning whether insolvency practitioners selling CGT assets subject to mortgage security were required to remit CGT in priority to the secured creditor. The controversy developed out of a reading of s254 of the Income Tax Assessment Act 1936 as it relates to trustees of incapacitated entities, including liquidators, VAs and receivers.
Late last year I co-authored a paper with Helen Symon SC concerning the liability of insolvency practitioners whilst in office to a range of taxes. The paper concentrated on CGT, Income Tax and GST. The main issues dealt with in the paper were whether sale of post CGT assets by an insolvency practitioner gave rise to an obligation to pay CGT on the sale in priority to a secured creditor (we formed the view this was probable), and the now recognised device of appointing an agent in possession to effect a post CGT asset sale, and the circumstances and period for which practitioners are required to file tax returns for the entities to which they are appointed.
A copy of the paper is available at this link – Taxation – Common Issues.
A decision handed down since the paper contains a similar analysis of s254 in obiter (non binding) comments of the Supreme Court of New South Wales. The decision is Goldana Investments Pty Ltd (recs & mgrs apptd) v National Mutual Life Nominees Ltd & ors  NSWSC 1134. In that decision, an application was made by the debtor company to have receivers removed on the grounds that the secured debt had been paid after the sale of a shopping centre. The receivers of Goldana successfully resisted the application to have them removed because their potential personal CGT liability arising because of s254 had not yet been resolved. It was therefore appropriate to allow the receivers to stay in office and in control of surplus proceeds from the sale. According to the judgment, the receivers are in the process of seeking a private ruling from the ATO on their personal liability.
Liability limited by a scheme approved under Professional Standards Legislation
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