• Administrative responsibilities

    Information for trustees appointed under the Bankruptcy Act 1966

    Separate ABNs for trustees

    You will not be required to apply for an Australian business number (ABN) for every estate (bankrupt estates and agreements under Part IX and Part X) which you administer.

    In the majority of cases, when an individual enters into an administration under the Bankruptcy Act 1966, they cease to be carrying on an enterprise in Australia. Therefore, they cease to satisfy the conditions necessary to have an ABN. In these cases, the trustee will not be required to apply for a separate ABN.

    In a minority of cases, an individual may become bankrupt or enter into a Part X agreement and still carry on in the same enterprise. Examples of this include taxi drivers and solicitors. If the individual carries on in the same enterprise, the trustee will need to apply for a separate ABN.

    For trustee appointments occurring on or after 1 April 2002, the trustee is no longer able to use the ABN of the insolvent individual when administering the estate. Where an ABN is required, the trustee needs to apply for a separate ABN in the normal manner in respect of each appointment as trustee under the Bankruptcy Act 1966. The new ABN will be used for all matters arising under the administration.

    See also:

    PAYG withholding obligations

    If you are a receiver appointed to personal property, a trustee of a bankrupt estate, Part X or personal insolvency agreement, you need to be aware of your administrative obligations under the pay as you go (PAYG) withholding system. These obligations also apply to payments made under the Fair Entitlement Guarantee (FEG).

    See also:

    Application of credits

    Until the bankrupt is discharged from bankruptcy or a Part IX or X debtor is released from their debts, excess credits such as credits for pay as you go (PAYG) withheld amounts, will be applied to reduce any liability, (both pre and post sequestration / Part X) before any remaining balance is refunded to the debtor.

    The exception to this is where credits arising from periods of income prior to sequestration or execution of a Part X will be offset even if the relevant assessment is made after these events. Credits will also be offset regardless of whether the taxpayer is discharged or released.

    Assuming no post-bankruptcy debts have been incurred, any excess credits arising after discharge or release will be refunded.

    See also:

    Bankruptcy part-way through a financial year

    The decision of the Full Federal Court, in Deputy Commissioner of Taxation v Jones (1999) FCA 308, has resulted in income tax relating to the period from the commencement of the year prior to sequestration, and ending with the day of sequestration, now being a provable debt in bankruptcy.

    In such circumstances, we may be required to issue split assessments relating to both the pre and post-sequestration parts of the financial year. This decision also affects Part IX and Part X debtors.

    Bankruptcy and prior year assessments

    It is important that a debtor's taxation affairs be brought up to prior to a dividend being paid in bankruptcy or proposal put to creditors under Part IX, X or Section 73. The debtor should be asked to lodge outstanding returns, activity statements or other documents to enable their total taxation liability to be determined.

    If the debtor is uncooperative, or where there is some likelihood that the lodgment of those returns will take so long that it will cause an unreasonable delay in the lodgment of the proof of debt, then default assessments may be raised in respect of the outstanding returns. Default assessments for various types of liabilities are covered by the following provisions:

    • Income Tax - Section 167 of the Income Tax Assessment Act 1936 (ITAA 1936)
    • Fringe Benefits Tax - Section 73 of the Fringe Benefits Amendment Act 1986 (FBTAA 1986)
    • Sales Tax - Section 101 of the Sales Tax Assessment Act 1982 (STAA 1982)
    • Superannuation Guarantee - Section 36 of the Superannuation Guarantee (Administration) Act 1992 (SGAA 1992)
    • Indirect taxes (ie Goods and Services Tax, Wine Tax, Luxury Car Tax) - Section 105-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA).

    Proposals under Part IX and Part X and Section 73

    We expect any proposal under Part IX, Part X and Section 73 of the Bankruptcy Act 1966 will satisfy the conditions outlined in Insolvency – collection, recovery and enforcement issues for entities under external administration.

    Each case is considered on its individual facts. It can be generally accepted that the Commissioner will support arrangements that have no adverse features and which can provide the Commonwealth with no lesser proportion of the provable debt within a reasonable period than would occur under a bankruptcy.

    Some of the issues that we will consider in deciding whether to vote in favour of a Part IX, Part X or Section 73 proposal include:

    • any legal advice which we may have obtained
    • the contents, comprehensiveness and adequacy of relevant reports, such as:
      • the statement of affairs or report as to affairs
      • the proposal
      • the report prepared by the trustee or administrator
      • any liabilities not yet established, such as unissued assessments or outstanding documents
      • whether the debtor has made appropriate arrangements to meet future tax liabilities as and when they fall due
      • the debtor’s compliance history, and the compliance history of related parties or entities
      • the extent and seriousness of any taxation offences which may have been committed
      • the likelihood that the proposals put forward would be achieved
      • the maintenance of any priority the Commissioner may have had in bankruptcy or liquidation
      • any association between the debtor and other creditors (including associations which involve an assignment of debt)
      • in the case of a debtor who is being less than candid about their financial affairs, the fact that the process may not provide the extensive investigative tools available to a trustee in bankruptcy or liquidator
      • other matters that are considered to be of public interest or which reasonably question the fairness and appropriateness of voting in support of proposals, particularly where the consequence of those proposals is the removal of statutory powers of investigation, examination or the ability to clawback assets or funds
      • any apparent voidable transactions or dispositions which might be unable to be pursued if the proposal were to be accepted
      • the tangible benefit to the Commonwealth revenue that is expected to be gained from any proposed arrangement
      • the manner in which the proposal would distribute a dividend between all classes of creditors or whether the proposal is considered to be unfairly prejudicial or discriminatory.
       

    Remuneration

    We expect that trustees will take steps to ensure that the remuneration and costs incurred in an administration are fair and reasonable and commensurate with the level of work undertaken. The trustee must be able to demonstrate that a task was necessary to be undertaken for the proper conduct of the administration and that the time charged was reasonable for the task concerned.

    We expect that trustees will be able to provide information which allows all creditors to understand the basis upon which remuneration has been calculated. Creditors must be supplied with sufficient information to make an informed decision when requested to approve remuneration.

    If we are not satisfied with the information provided, it may abstain from voting or vote against the motion for remuneration.

    There may be occasions when the creditors are asked to vote on the future remuneration of the trustee. We may consider voting for future remuneration if:

    • the administration is close to being finalised
    • the remuneration amount is capped
    • the practitioner has provided sufficient information to justify the amount
    • calling another creditors' meeting would impose unnecessary additional expenses upon creditors.

    See also:

    Information for external administrators appointed under the Corporations Act 2001

    No separate ABNs for external administrators

    External administrators appointed under the Corporations Act 2001 are not required to register for a separate Australian business number (ABN). A separate client account number will be attached to the ABN of the company to which the external administrator has been appointed.

    Clearances – liquidators and receivers

    Under Division 260 in Schedule 1 to the Taxation Administration Act 1953, external administrators have certain obligations. The external administrator is unable to part with any assets that are available to pay unsecured creditors before receiving a clearance notice from the Commissioner regardless of whether the ATO is a creditor. Until notified, the external administrator is to retain sufficient assets to pay all or a proportion of the taxation liability.

    An 'external administrator' for the purpose of a 'clearance notice' may be either:

    • a liquidator of any company being wound up
    • a receiver or a receiver manager for a debenture holder, who has taken possession of any assets of a company
    • an agent for a non-resident principal, who has been required by the principal to wind up a business or realise the assets of the principal.

    Obligations of external administrators and the Commissioner in regards to clearances are set out in the following provisions of the Taxation Administration Act 1953 and are applicable to appointments made after 1 July 2000:

    • section 260-45 for liquidators
    • section 260-75 for receivers
    • section 260-105 for agents winding up a business for a non-residential principal.

    There are no clearance provisions for other types of external administrator, including appointments under the Bankruptcy Act 1966 (including Part IX and Part X), voluntary administrators and Deed of Company Arrangement administrators.

    External administrators are required to notify the Commissioner within 14 days of:

    • their appointment as liquidator
    • their taking possession of the assets of a company as a receiver
    • receiving instructions from a non-resident principal to wind up a business of the principle.

    Failure to comply with the clearance provisions, including discharge of the taxation liability, may result in personal liability being imposed on the external administrator to the extent of the value of the assets which were at any time available for the payment of tax and required to be set aside.

    We must, as soon as practicable after being notified of the appointment of the external administrator, notify them with the amount of all the taxpayer's outstanding tax-related liabilities which is or will become payable. While an external administrator can part with assets to pay secured creditors and priority unsecured debts (for example, costs and remuneration and employee entitlements), they are unable, without the Commissioner's permission, to part with assets that are available to pay ordinary unsecured debts before receiving a clearance notice.

    Prior to issuing a clearance notice, we will identify all outstanding lodgments for all registrations for the company. We will notify the external administrator if the company has outstanding income tax returns, fringe benefit tax returns or outstanding activity statements and negotiate lodgment. If the external administrator is unable to assist in securing lodgment, a risk management approach may be adopted by us to determine if lodgment is required.

    We can require a liquidator to prepare and lodge any overdue documents for a company in liquidation, including documents for periods prior to the liquidator's date of appointment.

    We will require lodgment of any income tax returns for periods prior to the liquidator's date of appointment after having regard to, (but not limited to), the following factors:

    • the prospect for, and likely size of a dividend being paid to unsecured creditors
    • the likelihood that the return would, if lodged, reveal an increase in the tax liabilities owed to the Commissioner
    • the availability of books and records which would make it possible to prepare the return
    • the likelihood that the liquidator's cost of preparing those returns would be covered by the assets of the liquidated company without resulting in an inordinate adverse impact on other creditors
    • the wider community benefits of having the returns lodged.

    These factors are intended to ensure that liquidators will only be required to lodge where the circumstances reasonably support that requirement. It is expected that, in many cases, the requirement to lodge income tax returns should not arise.

    In the case of a receivership where a receiver has only partial control of the assets of a company, a clearance can be issued to the receiver without the need to have all income tax returns up to date. If the company is not in liquidation, outstanding returns will be demanded.

    See also:

    Clearance notice issued

    Once the clearance notice is issued, the external administrator is able to make a distribution to unsecured creditors. If a clearance notice is issued and it is subsequently found to be incorrect, we will inform the external administrator of this. If the external administrator has not distributed a dividend to unsecured creditors the incorrect notice will be revoked, by written notification, and a new notice issued.

    Under section 254 of the Income Tax Assessment Act 1936, liquidators, receivers and administrators appointed under Part 5.3A of the Corporations Act 2001 are required to prepare and lodge income tax returns for the period in an income tax year from the date of their appointment. Liquidators, receivers and administrators appointed under Part 5.3A of the Corporations Act 2001, as external administrator for tax purposes, are responsible for accounting for income or profits or gains derived in their capacity as liquidator or receiver or administrator appointed under Part 5.3A of the Corporations Act 2001.

    The company itself should prepare and lodge an income tax return for the period in an income tax year prior to the date of appointment of a liquidator or a receiver administrator appointed under Part 5.3A of the Corporations Act 2001. The company is also required to prepare and lodge any overdue returns for years prior to the appointment of a liquidator or receiver administrator appointed under Part 5.3A of the Corporations Act 2001.

    PAYG withholding obligations

    If you are a liquidator, receiver, receiver and manager, voluntary administrator (appointed under the Corporations Act 2001), or an administrator of a deed of company arrangement, you need to be aware of your administrative obligations under the pay as you go (PAYG) withholding system. They also apply if you make payments under the Employee Entitlement Support Scheme or General Employees Entitlements Redundancy Scheme (GEERS).

    See also:

    Deed of company arrangement proposals

    We expect that any proposal under Part 5.3A of the Corporations Act 2001 will satisfy the conditions outlined in Insolvency - collection, recovery and enforcement issues for entities under external administration. Some of the issues that we will consider in deciding whether to vote in favour of a proposal under Part 5.3A of the Corporations Act 2001 include:

    • the investigative powers available to a liquidator, particularly when they are compared with the more limited powers available to an administrator
    • the compliance history of the company
    • the priority to be given to the superannuation guarantee charge
    • any liabilities of the company not established
    • the ability of the company to meet future tax liabilities.

    Remuneration

    We expect that external administrators will take steps to ensure the remuneration and costs incurred in an administration are fair, reasonable and commensurate with the level of work undertaken. The external administrator must be able to demonstrate that a task was necessary to be undertaken for the proper conduct of the administration and that the time charged was reasonable for the task concerned.

    We expect that external administrators will be able to provide information which allows all creditors to understand the basis upon which remuneration has been calculated. Creditors must be supplied with sufficient information to make an informed decision when requested to approve remuneration.

    If we are not satisfied with the information provided, it may abstain from voting or vote against the motion for remuneration.

    There may be occasions when the creditors are asked to vote on the future remuneration of the external administrator. We may consider voting for future remuneration if:

    • the administration is close to being finalised
    • the remuneration amount is capped
    • the practitioner has provided sufficient information to justify the amount
    • calling another creditors' meeting would impose unnecessary additional expenses upon creditors.

    See also:

    Disclosure of taxpayer information – insolvent entities

    Here you'll find information about how and when we can release information about insolvent entities to insolvency practitioners.

    An insolvency practitioner may include a trustee in bankruptcy, a liquidator, a voluntary administrator, a receiver, or an administrator of a deed of company arrangement.

    As a general rule, we will not disclose information that is more than two years prior to the date of your appointment as the entity's representative.

    • legal basis for disclosure of information
    • disclosure varies by practitioner type
    • liquidators and voluntary administrators.

    See also:

    Legal basis for disclosure of information

    As an insolvency practitioner, you can obtain copies of many documents that we hold without making a request under the Freedom of Information Act 1982 (FOI Act).

    The confidentiality provisions in the Taxation Administration Act 1953 (TAA) permit us to disclose taxpayer information in certain specified circumstances. However, it must be an authorised disclosure and we need to exercise our discretion before disclosing the information.

    The information we disclose must be about an insolvent entity (the incapacitated entity) you formally represent.

    Where third-party information or substantial amounts of information are requested, we require specific reasons for the documents, including the purpose they will serve in the liquidation or administration process.

    Disclosure varies by practitioner type

    The information we can disclose varies according to the type of insolvency administration:

    Liquidators and voluntary administrators

    If you are a liquidator or voluntary administrator, you can use the Business Portal to access:

    • business activity statements (BAS) that have been lodged and processed
    • statements of account (for example, income tax account or BAS running balance)

    You can request other types of information, including:

    • tax returns
    • payment summary statements
    • relevant court documents
    • notices of assessment
    • relevant correspondence
    • relevant case notes.

    Requests for disclosure of correspondence and case notes are assessed on a case-by-case basis. You will need to specify the event, transaction or period you require case notes for, and detail the purpose they will serve in the liquidation or administration process.

    See also:

    Deed administrators

    Access to the Business Portal is not available to deed administrators. However, we can generally provide copies of the following information in relation to 'provable' debts:

    • statements of account
    • business activity statements (BAS) that have been lodged and processed
    • tax returns that have been lodged and processed
    • payment summary statements – the overall statement which was lodged by the company
    • notices of assessment
    • relevant court documents – for example, a judgment obtained.

    Trustees: bankruptcy or personal insolvency agreements

    Access to the Business Portal is not available to the trustee. However, we can generally provide copies of the following information to trustees in bankruptcy and trustees of personal insolvency agreements:

    • statements of account
    • notices of assessment (pre-insolvency)
    • pre-insolvency BAS that have been lodged and processed
    • pre-insolvency tax returns that have been lodged and processed
    • director penalty notices
    • individual payment summary statements
    • relevant case notes (disclosure is assessed on a case-by-case basis. You will need to specify the event, transaction or period you require case notes for, and detail the purpose they will serve in the liquidation or administration process).

    Trustees of personal insolvency agreements are required to provide specific reasons for the request for information, including the purpose the information will serve in the administration process. In some cases, we may require a copy of the personal insolvency agreement before providing any information.

    Post-insolvency information will only be given to the trustee where we can establish that providing this information is relevant to the administration.

    Receivers

    If you are a receiver and/or a receiver manager, we can only disclose limited information about the entity – the information must be required for you to comply with your obligations on behalf of the incapacitated entity under the tax laws.

    If you are a receiver appointed pursuant to a circulating security interest, you will be required to pay employees’ debts, including super guarantee charge, that were outstanding at the date of your appointment as receiver.

    Obtaining information from us

    Using the Business Portal

    All practitioners can interact with us using the Business Portal's secure messaging function. You can electronically request the documents you need and enables us to provide the information in a digital, more convenient format.

    If you are a liquidator or voluntary administrator, the Business Portal is the most efficient way to obtain information.

    You can obtain business activity statements (BAS) and statements of account in relation to incapacitated entities you represent.

    For other types of information, you can use the portal's secure messaging function under the 'Insolvency' subject to make a request to us.

    Writing to us

    If you are unable to access the portal, you can write to us for information about an insolvent entity you represent by completing the Debt insolvency cover sheet (PDF, 94KB)This link will download a file and sending either:

    • via fax to 1300 726 594
    • via mail to:

    Australian Taxation Office
    PO Box 9003
    PENRITH  NSW  2740

    See also:

    Last modified: 31 Mar 2016QC 43946