Where any amounts are paid to an insolvency practitioner pursuant to an executed Deed of Indemnity (indemnity expenses) and any recoveries are made, the Deputy Commissioner of Taxation (DCT) will expect as a minimum that the indemnity expenses will be repaid as a priority expense.
The supporting legislation is in:
- paragraph 556(1)(a) of the Corporations Act 2001 – for company liquidation matters
- paragraph 109(1)(a) of the Bankruptcy Act 1966 – for bankruptcy matters.
Where property has been recovered, realised, protected or preserved as a result of the indemnity provided by the DCT, the DCT will usually require an application be made to court to obtain a priority dividend on the DCT’s proof of debt.
The supporting legislation is in:
- section 564 of the Corporations Act 2001 – for company liquidation matters
- subsection 109(10) of the Bankruptcy Act 1966 – for bankruptcy matters.
Whether an application is made will depend on the circumstances of each case and whether the outcome is likely to benefit the DCT. The application will be made by the insolvency practitioner and funded from the assets of the liquidation or bankrupt estate. The outcome of any application will be at the discretion of the court.
The DCT reserves the right to make their own application to the court if they consider it to be in the interests of the Australian Government to do so.
Terms covering the above will be incorporated into all Deeds of Indemnity.
Information regarding the repayments of indemnity in relation to the Corporations Act 2001 (for company liquidation matters) and the Bankruptcy Act 1966 (for bankruptcy matters).