ATO’s bid for 10 year ban heading for trial

Liquidator David Iannuzzi is headed for trial

Veritas Advisory principal David Iannuzzi.

Embattled Sydney liquidator David Iannuzzi is headed for trial after Federal Court judge Nye Perram delivered judgement this week on an application launched by the tax office for a judicial inquiry into Iannuzzi’s conduct.

The tax personage wants Iannuzzi banned for 10 years and restrained from working as an insolvency practitioner for the same period.

For good measure it also wants the court to order Iannuzzi compensate creditors of 23 companies, most of which were referred via an outfit called Banq Accountants, which coincidentally was ordered wound up in insolvency this week.

Since the Deputy Commissioner of Taxation (DCoT) first launched its bid in August 2017 Iannuzzi has steadfastly denied the allegations.

INO’s mail is that he will continue to do so in the wake of the judgment, in which Justice Perram explains why objections to the evidence that the DCoT submitted failed.

Iannuzzi’s legal team – headed by 11 Wentworth’s Ian Pyke SC – argued that because the bulk if not all of the DCoT’s evidence had been obtained under “compulsory powers under s 263 of the Income Tax Assessment Act 1936 (Cth) (‘ITAA 1936’) and s 353-10 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (‘TAA 1953’)” this amounted to the use of a power for a foreign purpose.

Effectively that was said to be because the obtaining of the material – some of it seized in raids – was for the purposes of administering a tax law and could not therefor be applied to the pursuit of a liquidator for alleged misconduct.

“As to the first argument, Mr Pike submitted that an inquiry into Mr Iannuzzi under s 536 with a view to disciplining him was clearly not an activity which was for the purpose of administering a taxation law,” Justice Perram said.

“If that were truly all that the Commissioner sought to do then, without deciding the issue, I might be disposed to see some force in this argument.

“However, it is not a complete or entirely accurate description of the Commissioner’s proceeding. In particular, it omits reference to the Commissioner’s claim for compensation from Mr Iannuzzi for his alleged defaults.

“The losses claimed are for unpaid tax which the Commissioner has been unable to recover allegedly because of defaults of Mr Iannuzzi.

“As such, I think it very difficult to say that the proceeding is not for the purpose of the administration or operation of a taxation law.

In particular, the recovery of compensation from a liquidator where alleged phoenixing has resulted in revenue being lost appears to be centrally concerned with that concept,” the judge said.

“The question may be tested by observing that if Mr Pike’s submission about this were correct, then the Commissioner would never be able to seek compensation from persons whose actions have resulted in tax not being paid by a taxpayer. This seems unlikely.”

The judge ordered that the inquiry and the DCoT’s claims for banning orders and compensation be heard simultaneously and instructed the parties to return before him on July 24 for case management.

See the judgement: Commissioner of Taxation v Iannuzzi [2018] FCA 1053

Further reading:

Liquidator Facing 10 Year Ban

DCoT Doubts Nominee Liquidators’ Independence

Liquidators And Ex-Labor MP To Be Grilled By FEG

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