The need to respond to ATO demands

Practitioners will be aware that the Commissioner of Taxation has strong powers of inquiry and recovery under the tax legislation. Insolvency practitioners are generally subject to those powers despite the practitioner’s own powers and responsibilities under the Corporations Act and the Bankruptcy Act.

In a recent decision, the Federal Court has found that a demand by the Commissioner under section 264 of the Income Tax Assessment Act 1936 for company records held by a liquidator must be complied with by the liquidator.

This outcome was despite s 486 of the Corporations Act which provides that 'the Court may make such order for inspection of the books of the company by creditors and contributories as the Court thinks just, and any books in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise': Commissioner of Taxation v Warner [2015] FCA 659.

ARITA members will be interested in the details of this case, and the reasons why the liquidators were ordered to personally pay the Commissioner’s costs.  Examples of cases where the Commissioner's demands were found to be invalid are also explained.