Introduction

Introduction

Does the ATO have priority over secured creditors in a liquidation? Is a receiver required to account to the ATO for any tax payable out of funds received on the sale of an asset before accounting to the secured creditor? Are receivers and liquidators personally liable for the tax payable from funds received by them? Can receivers and liquidators avoid such personal liability by distributing funds received to creditors before a tax assessment arises? These issues were at the centre of a Federal Court judgment handed down on 21 February 2014.

The good news is that public works construction projects for municipalities are projected to remain a major sector of construction activity for the foreseeable future. The not-so-good news is that municipal bankruptcy filings are on the rise, and they are likely to increase. The issues facing parties under contract with a municipality when it files for bankruptcy protection are playing out nationally in places like Stockton, California, and Detroit, Michigan.