Where an indemnity request that meets the minimum standards is rejected, the Deputy Commissioner of Taxation (DCT) will write to the insolvency practitioner notifying that the indemnity has been rejected.
Decisions made by the DCT to reject an indemnity are not reviewable decisions and the DCT is under no obligation to provide reasons for rejection. However, it is the normal practice of the DCT to provide general reasons, unless the DCT determines providing reasons could be in breach of privacy or confidentiality
The DCT may reject an indemnity in circumstances where an insolvency practitioner believes that the proposed action has very good merit and prospects of success and recovery. Such situations may arise from time to time for reasons which include:
- Staff resources and /or budgetary constraints.
- The DCT may have other viable means of recovery which are more cost-effective and efficient, for example director's penalties.
- The likely indemnity expenses will exceed the value of the DCT's proof of debt unless there are exceptional circumstances which justify such a decision.
- The DCT will need to be satisfied that the defendant(s) will have sufficient recoverable assets to enable the insolvency practitioner to repay the indemnity expenses in full, plus pay a reasonable dividend on the DCT's proof of debt unless exceptional circumstances exist.