Employers that have gone into liquidation 277-04190000

When an employer enters an insolvency process, Services Australia is usually advised by letter or phone from an insolvency agent, including:

• the date the employer entered the insolvency process
• the name and contact details for the insolvency agent, and
• the ABN or ACN of the insolvent organisation

If the advice is received from another source (for example, the employer, the Australian Taxation Office (ATO) or customer), obtain the insolvency agent’s contact details. There is no official register of insolvency agents appointed to organisations. If the employer has ceased trading it may be difficult to locate the insolvency agent, however the following actions may help identify the insolvency agent:

• if the organisation is a company, check the Australian Securities and Investments Commission (ASIC) website
• contact the customer and ask if they have details for the insolvency agent, and
• search ATO/Cuba systems using the ABN of the insolvent company

Use the Insolvency referral macro to refer the employer to a Debt Liquidation Officer.

Update the organisation’s details and record a new insolvency process in Cuba, see Liquidation Cuba Process Help. Contact the insolvency agent if more information is needed.

If the advice is received by a Service Officer(s), for example via an incoming call, record the advice in the customer's Communication window including:

• the date the employer entered the insolvency process
• the name and contact details for the insolvency agent, and
• the ABN or ACN of the insolvent organisation

Create a General Follow-up intray referring to the notepad and route it to the ESO or team managing the employer.

Check the employer’s record to see if there are any linked employees, issues to be resolved, or a debt owing.

If there is no record of the employer in Cuba, send a unique letter using the Liquidation letters macro to the insolvency agent advising that the agency does not need to be involved in the insolvency process. Send a unique letter through the insolvency agent’s CSRN on Cuba. Ensure the unique letter is sent to the correct office. If correspondence has been incorrectly recorded on the wrong CSRN, reassign it to the correct record. See Correspondence Cuba Process Help.

If the insolvency agent does not have a record in Cuba, create a record and issue the unique letter:

• record the details on the Liquidation spreadsheet, under the 'Not in Cuba' tab
• delete the intray
• procedure ends here in this situation. See Letters Cuba Process Help

If the insolvent organisation has a record in Cuba but there are no linked employees, no outstanding issues and no debt:

• change the status to 'Insolvent'
• update the address and contact details to that of the Liquidators
• remove the attributes
• lock the employer to the National Office, SEW NAT EMP SERVICES, A – ES DUPES/CEASED position
• use the Liquidation letters macro to send a letter to the insolvency agent
• record the details on the Liquidation spreadsheet, under 'No Debt No Links' tab
• delete the intray

If the following applies, see Table 2:

• there are no linked employees and no outstanding issues but there is a debt
• there are linked employees, outstanding debt or unresolved issues to be clarified with the insolvency agent, or
• there are any current s72A notices

Where a Service Officer is advised by an employer that the business is in Administration/Liquidation, contact the insolvency agent to:

• obtain the date the insolvency process started
• obtain the insolvency agent’s details if necessary and update in Cuba
• advise that the agency is a priority creditor in insolvency processes (for child support deductions, not for penalties, costs or fines). See Step 2 for further information
• ask if employee incomes are likely to change as a result of the insolvency process
• follow up on any outstanding issues. For example, outstanding Top Up, excess cash, unallocated cash due to insufficient break up information, see Step 4
• ascertain whether the organisation is to continue trading
• if links will remain in place, ensure the insolvency agent has been provided with the most up to date deduction information. If not, use the Liquidation letters macro to create a unique letter and attach the employees current ‘schedule of deductions’ and payment details. Use the Document Upload Request macro to upload this to the employer’s correspondence
• record the unique letter in the employer’s communication window. See Documenting Child Support information

Seeking deduction information from the liquidator:

• seek deduction information from the liquidator for the period/s in question
• if the liquidator asks for a written request, complete the ‘Linked PP’s Deduction Information Required letter’ template, located in the ES Debt Liquidations Letters folder
• attach the ‘schedule of deductions’ for the relevant periods, record the unique letter in the employer’s communication window. See Documenting Child Support information
• under the ‘Active’ tab, record the details on the Liquidation spreadsheet to enable regular follow up. See Step 3 in Table 3

Other actions to complete:

• check the ABN the employee is/was linked to and establish if they are being employed by an associated employer. If confirmed, delink and link to the associated employer. See Employer Services generated Linking Referrals
• issue a proof of debt letter, if required. See Table 3
• record the conversation with the liquidator. Use the Employer Services documentation – Where to document user guide

Note: if all details above have been confirmed, a proof of debt letter can be sent without receiving a formal notice from the insolvency agent.

It is critical that the insolvency agent understands that child support debts rank highly when determining which creditors to pay. The insolvency agent must be made aware that the agency is a priority creditor under child support legislation (for child support deductions, not for penalties, costs or fines). The following sections explain the level of priority for different types of child support debts:

• EW amounts deducted but not remitted to the agency: debts arising from EW payments deducted but not yet remitted are priority debts in accordance with section 50 of the Child Support (Registration & Collection) Act 1988. Subsection 50(2) states that an amount payable under subsection 50(1) has priority over all other debts, whether preferential, secured or unsecured
• s72A payments deducted but not remitted: where Child Support become aware that an employer has made deductions under a s72A notice but not remitted the funds. For example, if it is apparent that an offence may have been committed, report the suspected Welfare, Health and Child Support fraud so that the Intelligence and Investigations Branch can decide if there are sufficient grounds for prosecution
• amounts not yet deducted: these amounts are not yet owed, but are payments of wages owed to the payer. A payer must lodge a claim for these amounts directly with the insolvency agent. Where the payer’s claim is successful and payment of unpaid wages are subsequently made to the paying parent the insolvency agent becomes bound by any Child Support notices (s72A or s45) in place and should forward payment to Services Australia in compliance with those notices. Take steps to notify the insolvency agent of their obligations should it become aware of this possibility
• court ordered garnishees (s72A notices): if the liquidator states there is a court ordered garnishee which will take priority over Child Support notices (s45/s72A), advise the liquidator that notices issued by the Registrar have priority over the court order. An s45 notice is a statutory garnishee notice issued under Commonwealth legislation. The order in which the notices were received does not matter

Note: if the employer has deducted amounts in accordance with an employer withholding notice, payment of those amounts to the Register ought to be prioritised ahead of all other debts (this includes unpaid PAYG tax, wages and superannuation entitlements). The exceptions to this being where there are amounts payable under the former subsection 221YHZD(3) Income Tax Assessment Act (1936) and any costs, charges or expenses of the administration of the estate or of the winding up of the company (subsection 50(3) of the Registration and Collection Act).

See the References page and Bankruptcy for child support customers.

If an employee’s income will be affected by the insolvency process (including loss of employment), the owning Service Officer must contact them to discuss options. Route a PP EW EMPLOYER LIQUIDATION intray to the owning Service Officer or team, requesting they contact the payer and payee to discuss the effects of the insolvency. See Step 2 in Table 3.

Follow up on any outstanding issues, such as amounts that have been deducted but not remitted. Clarify that all unremitted deductions have been reported to us. Ask that they check the employer’s payroll details and financial records to confirm this.

If the organisation is to continue trading, ensure the insolvency agent is aware of their obligations. The obligations will vary depending on how the insolvency is being dealt with. For:

• pre-appointment wages (before insolvency agent is appointed):
• upon the appointment of an insolvency agent, the company will remain bound by existing notices issued under EW or s72A
• post-appointment wages (where organisation continues to trade), go to Step 6

If an organisation continues to trade during insolvency, the agency must confirm who is actually paying the child support payer(s). Payments may be made to the child support payer(s) by a liquidator, administrator or receiver. Depending on what happens during the insolvency, the type of insolvency agent may change and there may even be more than 1 type of insolvency agent operating at the same time.

Keep in regular contact with the insolvency agents to maintain knowledge of who is currently responsible for paying the child support payer and be aware of their obligations as follows:

• Administrator appointed:
• if an administrator is appointed and continues to employ staff under existing contracts or employs new or existing staff under new contracts, the owning Service Officer must delink all s45 customers and issue s72A notices as appropriate
• review all existing s72A notices to determine if they need to be reissued. Address reissued notices to the administrator
• the administrator will be liable to comply with notices under s72A as per any other employment arrangement
• Receiver appointed:
• if a receiver is appointed and continues to employ staff under existing contracts, existing EW or s72A arrangements continue to apply
• copies of existing notices may need to be sent to the receiver. If there are no existing notices in place, issue new notices
• if the receiver employs new or existing staff under new contracts, the owning Service Officer must issue s72A notices to deduct funds from a payer’s wages
• the receiver will be liable to comply with notices under s72A as per any other employment arrangement
• Liquidator appointed:
• if a liquidator continues to trade during liquidation, current EW or s72A arrangements continue to apply
• if there are no current notices in place, issue new notices to the employer. Ask the liquidator if they need copies of the notices sent to them

If the entity is ceasing to trade:

• de-link all employees
• change the employer status to ‘ceased trading’, and
• remove all attributes from the employer

If the employer has:

• a debt to the agency, go to Table 3
• a debt, in liquidation and there are linked employees, go to Step 8
• no debt but there are linked employees, go to Step 2 in Table 3
• no debt and there are no linked employees, go to Step 3 in Table 3

If the employer is in liquidation, has a debt and linked employees:

• de-link all employees
• obtain outstanding deduction figures from the Liquidator
• change the employer status to 'Insolvent'
• remove all attributes from the employer
• update the trading name to 'In Liquidation' and
• issue Proof of Debt letter, go to Table 3

To represent Services Australia’s interests, a Proof of Debt notice (POD) must be issued even if the insolvency agent does not request it. Inform the insolvency agent that the agency is a priority creditor (for child support deductions, not for penalties, costs or fines), as they may advise there are no funds available but there may be funds to pay priority creditors.

Before issuing a POD, reconcile the employer’s account to ensure there is no excess or unallocated cash. Investigate and resolve any issues.

The POD provides a breakdown of the employer’s child support debt at the date of liquidation which will include unremitted child support.

Issue an approved Liquidation Proof of Debt (including covering letter), even if the insolvency agent provides a generic POD form. Do not use the notice currently available in Cuba. The POD letter must contain the Chief Operating Officer’s signature block but no actual signature. The ESO does not need to include their details or signature on the letter. See Cuba Letters Process Help.

Include the following with the POD letter:

• attach an Advice of a likely payment of debt form (CS4456). Note: before printing, complete questions 1 to 3 and include the Payment Reference Number
• include any deduction schedules which were in place at the time of the liquidation
• a copy of any s72A notices in force at the time that were not fully complied with

Record the POD notice in the liquidator’s organisation’s Communication window and batch file a copy:

• upload to the employer’s correspondence window, using the Document Upload Request macro. See Documenting Child Support information
• record the unique letter in the employer’s communication window. See Documenting Child Support information
• place a copy in the ES Debt Liquidations folder – Proof of Debts
• in the Employer Liquidation window, select ‘Claim form completed’
• under the ‘Active’ tab, record the details on the Liquidation spreadsheet to enable regular follow up, see Step 3
• delete the intray

If the employer has:

• linked employees, go to Step 2
• no linked employees, go to Step 3

If a payer is linked to an insolvent employer, their employment may be terminated or their income reduced.

Upon receiving a PP EW EMPLOYER LIQUIDATION intray from an ESO, Service Officers can contact the payer to provide options for managing their ongoing child support obligations as follows:

• they may need to make manual child support payments
• their payment arrangement may need to change
• they may need to estimate their income
• liquidation of the employer does not mean their arrears will be discharged
• maintenance and penalties continue to accrue after the liquidation date
• Services Australia will continue to actively collect all amounts owing
• the payer should notify Child Support if their employment situation changes, and
• any unpaid deductions still need to be paid, except EW that has been deducted but not remitted

Note: if the customer is concerned that the employer has not reported deductions to Child Support (not all deductions have been applied to their account) they should provide deduction evidence (such as payslips) so this can be investigated, top up applied and a POD issued by ESO.

The owning Service Officer must also contact the payee if their child support payments will be affected by any change to the payer’s employment conditions. Advise the payee that the payer’s circumstances have changed, but do not discuss any specific circumstances regarding loss of employment or reduction in hours.

Note: some information on liquidations is publicly available through sources such as public notices in newspapers or the Australian Securities and Investments Commission (ASIC) website. Do not disclose specific information about the payer’s employment to the payee.

Monitor and maintain insolvency details in Cuba so they are current at all times. Make contact with the insolvency agent at least every 2-3 months for an update on the progress of the insolvency process. See Step 4.

If the insolvency agent changes during the insolvency process, update the details and issue a POD notice to the new insolvency agent.

If the provable debt changes (for example, a payment is received from the insolvency agent) issue a new POD notice.

Fully document all discussions and decisions, including:

• details of contact with the insolvency agent
• details of adjustments made to the debt, including the reason and calculations
• all employees’ names as well as the date and amount of deductions owing, and
• confirmation that the agency is listed as a priority creditor and the insolvency agent is aware that the agency receives a notice of intended distribution

Use the ES Documentation – Where to Document User Guide.

If payment is received from the insolvency agent, apply it to the outstanding debts of the employer as per Step 3.

The insolvency agent will advise when the insolvency action is completed and the company is wound up. When this occurs:

• remit any unpaid employer penalties in line with the Child Support late payment penalties and estimate penalties
• document any final information regarding the insolvency in Cuba, and
• update contact details of the insolvency agent if necessary

See the Organisation Contacts Cuba Process Help and the Liquidation Cuba Process Help for more information.

Where the insolvency agent advises that winding up the company has been finalised and there are no further payments to be distributed, refer for non-pursuit of the debt via National ICS. The delegation to approve non-pursuit of an Employer debt is at the EL1 level.

If it is apparent that an offence may have been committed, such as failure to remit funds or failure to comply with a s72A notice, report the suspected Welfare, Health and Child Support fraud so that the Intelligence and Investigations Branch can decide if there are sufficient grounds for prosecution.

When the insolvency has been finalised:

• delete the trading name of 'In Liquidation', and
• lock the organisation to National Office, MC SEW NAT EMP SERVICES, A – ES DUPES/CEASED