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Michael Murray’s on-going commentary on issues in corporate and personal insolvency law and related policy and law reform, in Australia and internationally. Given the scope of insolvency, this extends to business, consumer and professional conduct, and ethics, governance and regulation, criminal, tax, environmental and administrative law, and the courts and government.

 

‘WTF’ – five years of tax returns not lodged!

Upon being told in 2102 by his accountant, D, that his company’s business activity statements had not been lodged for 5 years, since 2007, the director responded:

“guys … WTF I was under the understanding that we were only behind for the last 3 or 4 not since I started. [M] can you please set up an appointment with [D] so I can resolve”.

In the months after that, in 2012 and 2013, the director transferred all funds of the company – over $480,000 – to himself and his wife.

The company went into liquidation in 2014, on the ATO’s application.  The liquidator sued the director. He blamed D, his accountant.

The director was found to have been aware that there were significant taxation issues and that no BAS had been lodged for a significant period, in fact for over five years.

While the accountant

“displayed a total inattention to dealing with”

the director’s company’s affairs, the loss arose from his own conduct in breach of his duties as a director. It was incumbent upon him, in the proper exercise of his director’s duties, to

“not make distributions for his own personal gain in circumstances where such distributions were to the detriment of the [company] by denuding it of available funds to meet any outstanding indebtedness to the ATO”.

See Simpson v Tropical Hire Pty Ltd (in liq) [2017] QCA 273

Comments

This was a rather obvious outcome, in relation to the director.

Issues not addressed are:

  • How the ATO could allow outstanding BAS for a successful business to accumulate for 5 years without apparent action?
  • The accountant’s display of “a total inattention to dealing with” the director’s tax affairs, without explanation, although the judgment refers to a query about his retainer.
  • While the director’s wife received the benefit of the moneys, the question whether she was complicit in his breach of duty was not in issue.

 

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