In a decision handed down by Black J on 25 March 2022, the New South Wales Supreme Court provided useful guidance on the order of priority of payments in a winding up where employee debts and secured creditor claims exist: In the matter of Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 340.

Research and development tax refunds (R&D Refunds) fall within the definition of an 'account' and are, therefore a circulating asset pursuant to s 340(1) of the Personal Property Securities Act 2009 (PPSA). Consequently, and upon the assessment of the company’s property available to pay creditors (other than secured creditors), s 561 of the Corporations Act 2001 (Cth) (Act) was enlivened and the R&D Refunds were to be paid to employees in priority to the secured creditor.

In a corporate group context, appointing a shell company with no assets as the formal ”employer of record” cannot be used as a means of undermining employee claims for payment ahead of a secured creditor under s 561 of the Act. A ‘true employer’ analysis will be used when ascertaining who is an employee under s 556(2) of the Act.

Read the original article on ARITA:
New South Wales Supreme Court clarifies priority of claims over R&D tax refunds between employees and secured creditors