Did you know that bankruptcy trustees are now liable for capital gains tax (CGT) on the sale of real property? Section 254 of the Income Tax Assessment Act 1936 (Cth) imposes specific obligations on trustees and agents, covering income, profits, and gains of a capital nature in their representative capacity. This has recently taken on new importance for bankruptcy trustees.

What has changed?

In the last few years, case law has established several important key principles in trust law in the context of insolvent trustees.

It is now well established that:

The law can be slow to adapt to emerging technologies such as cryptocurrency. However, with a thorough knowledge of existing legal avenues, adaptation is not always necessary. Macpherson Kelley recently acted in a case that demonstrates how trustees in bankruptcy can use existing tools at their disposal to investigate, and ultimately recover, cryptocurrency held by bankrupts.

Identifying and locating cryptocurrency

If a trustee becomes aware that a bankrupt has owned or traded in cryptocurrency assets, the trustee will normally:

In a win for liquidators, the Full Court of the Federal Court of Australia this week found that a creditor cannot rely on set-off under the Corporations Act 2001 to reduce an unfair preference claim under section 588FA of the Corporations Act 2001 (Act).

Intellectual property (IP) is a valuable asset in any liquidation or bankruptcy. However, it presents unique legal and practical challenges for insolvency practitioners.

These challenges include:

On 24 September 2020 the Federal Government announced, as part of its JobMaker plan, a package of reforms directed at streamlining insolvency processes for small businesses.

The reforms draw on key features of the US Chapter 11 bankruptcy process and include:

In a significant win for insolvency practitioners, the liquidators of ‘wine-in-a-can’ business Barokes Pty Ltd (In Liquidation) have successfully fended off fierce opposition to its remuneration for work performed in winding up the Company.

The case, in which Macpherson Kelley acted for the liquidators, serves as a reminder that, in considering section 60-12 of the Insolvency Practice Schedule (Corporations) (IPS), the Court will not hastily “punish” external administrators for actions that creditors dislike.

Background

On 22 March 2020, the Federal Government announced a raft of proposed temporary changes to insolvency laws which increased the threshold and time limit for compliance for statutory demands and bankruptcy notices (see our original article). The temporary measures also provided relief for directors from any personal liability for trading while insolvent.