Section 254 of the Income Tax Assessment Act imposes obligations on agents and trustees concerning income, profit or gains of a capital nature.
Application of the section extends to liquidators, receivers and administrators by virtue of the extended definition given to the term “trustee” in section 6(1) of the ITAA.
Section 254 provides that agents and trustees are:
- responsible for the taxation consequences
- required to lodge returns
- assessed in their personal capacity
- required to retain funds sufficient to pay “tax which is or will become due”1
- made personally liable.
Draft Determination TD2012/D72 makes it clear that a receiver’s obligations under section 254 are no different notwithstanding the fact that:
- the receiver is bound to apply money received from the disposal of the debtor’s assets to meet the debts of his or her appointor, the secured creditor; and/or
- the arrangements for disposal of the relevant asset provides that the proceeds are payable direct to the secured creditor.
The draft ruling dispels any contention that a receiver is acting other than as agent of the debtor even though they have obligations to their appointor, because in receiving proceeds from the disposal of the debtor’s assets the receiver is not trustee or agent of the secured creditor.
Accordingly, the receiver must, as trustee/agent of the debtor, retain sufficient funds to pay the tax liability.
The position of receivers is contrasted, in the draft determination, with that of a mortgagee who goes into possession and appoints an agent to sell the debtor’s property. In that situation, the agent is the agent of the mortgagee and not the agent of the debtor. Accordingly, section 254 does not apply to the mortgagee’s agent.
1 A separate draft determination TD2012/D63 also makes it clear that the term “tax which is or will become due” is not restricted to tax that has been assessed, and includes tax that will become due when an assessment is made. That is, the obligation to retain an amount, to pay a tax liability, may arise in respect to the tax that has not yet been assessed. 2 TD2012/D7 is proposed to apply to arrangements begun to be carried out from the date that the final determination is issued. 3 TD2012/D6 is proposed to apply both before and after the date that the final determination is issued but will not apply to tax payers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the determination.