[This post was updated on 24/3/2014.]
No one likes doing their income tax returns. So company liquidators and receivers must be relieved that the Australian Taxation Office (ATO) has relaxed its requirements for lodgment of returns, even if it is only for periods prior to the date of appointment.
The ATO’s viewpoint (from July 2010) is set out in a web document headed “Information for trustees appointed under the Corporations Act 2001”, specifically under the sub headings “Clearances – liquidators and receivers” (last modified 15/4/2013)and “Clearance notice issued” (last modified 15/4/2013).
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Pre-appointment returns
The ATO says that from July 2010 ” … a risk management approach may be adopted by the ATO to determine if lodgment (of outstanding income tax returns, fringe benefit tax returns or outstanding activity statements) is required”.
A risk is defined by the Australia/New Zealand Standard for Risk Management (AS/NZS 4360:2004) as “…the possibility of something happening that impacts on your objectives. It is the chance to either make a gain or a loss. It is measured in terms of likelihood and consequence.”
The ATO states that in making its risk assessment it will have regard to, but will not be limited to, certain factors. Those factors are listed in the text box below.
Of these factors the ATO’s says that they:
” … 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.”
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The main risk management factors to be used by the ATO in deciding whether pre-appointment returns must be lodged.
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For receivers, as distinct from liquidators, the ATO has taken the view that: ” … 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.” Presumably this means that if the receiver has control of all the assets, the ATO will demand outstanding returns but will take a risk management approach if the receiver protests or refuses.
Legal principle
Under income tax legislation the ATO 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. This statement of principle is restated for the record in document 62547.
Post-appointment returns are required
The document also makes it clear that post-appointment returns are required to be prepared and lodged by liquidators, receivers and administrators:
“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 trustees 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. “
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