Commissioner could not garnishee moneys of company in liquidation - Bruton Holdings
01 Sep 2009
The High Court (French CJ, Gummow, Hayne, Heydon and Bell JJ) has held that the Commissioner's general power to issue a notice under s 260-5 of the Taxation Administration Act 1953 (Cth) ("Administration Act") was not available once a liquidator had been appointed to the taxpayer company. In its terms, the s 260-5 Notice required a firm of solicitors to pay to the Commissioner money the taxpayer company had deposited with that firm. The Commissioner's rights in this situation were limited to those contained in s 260-45 of the Administration Act.
Section 260-45 deals specifically with collection and recovery of tax liabilities of companies from liquidators. Section 260-45 provides that the Commissioner must notify the liquidator of the amount the Commissioner considers is enough to discharge any outstanding tax-related liabilities of the company. The section further provides, in effect, that the liquidator is obliged to set aside from the assets of the company available to pay tax-related liabilities and other, non-priority, unsecured debts, the proportion of those available assets that would be applied in accordance with s 555 of the Corporations Act 2001 (Cth) to meet the notified amount of tax-related liabilities.
This conclusion was also supported by, but did not need to rely on, s 500 of the Corporations Act which provides: "(1) Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void."
Accordingly, the High Court upheld the taxpayer company's appeal against the decision of the Full Federal Court: Bruton Holdings Pty Limited (in liquidation) v Commissioner of Taxation  HCA 32 (High Court; French CJ, Gummow, Hayne, Heydon and Bell JJ; 26 August 2009).
For a copy of the decision, go here