New South Wales Supreme Court clarifies priority of claims over R&D tax refunds between employees and secured creditors

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
Read more articles from The Annual Return: 2022 in Review.
Keep up to date with our legal insights and events
Sign upRecent articles

Australia’s new mandatory merger regime is taking shape
The new merger notification regime will become mandatory on 1 January 2026.

No basis for Holden dealers to re-write bargain post-Australian exit
The Supreme Court of Victoria has dismissed a claim brought against General Motors Holden Australia NSC Pty Ltd.

Major Foreign Investment Review Board guidance notes updates - what you need to know
There are stricter rules for foreign persons wanting to purchase residential property in Australia.

A step by step guide to the new Franchising Code of Conduct
The New Code comes into effect on 1 April 2025.
Partner
Melbourne