In recent times, there has been much conjecture surrounding whether liquidators and receivers are obliged to retain monies received from the proceeds of sale of assets in contemplation of an  assessment being issued by the Commissioner of Taxation for any apparent net capital gain realised by the company from the sale. This is particularly difficult in circumstances where details of the initial acquisition of the asset by the company are vague or unknown.

In Australian Building Systems Pty Ltd v Commissioner of Taxation [2015] HCA48, the High Court of Australia has provided some certainty for appointees, by finding that s254 of the Income Tax Assessment Act (the Act) requires monies to be withheld only where an assessment has actually been issued.

Given that in certain circumstances personal liability can be imposed on persons responsible for meeting taxation obligations if the Act is not complied with, the decision represents an important step forward in a difficult area of law.

By prescribing that monies are only required to be retained in circumstances where an assessment has already been issued, the High Court of Australia has given certainty to liquidators and receivers, who otherwise faced practical difficulties in making a judgement call and estimating what a notional assessment might entail.

For more information contact ERA Legal.