The Supreme Court of NSW has ordered that the heavily IT industry-focused payroll outsourcing firm that was at the centre of a $165 million tax fraud investigation by the Australian Federal Police (AFP) be wound up and liquidated.
The decision comes roughly five months after it was revealed that the payroll firm, Plutus Payroll, allegedly being run by several members of a syndicate alleged to be responsible for the $165 million tax fraud against the Federal Government.
The revelation came as the AFP wrapped up an eight-month investigation, codenamed Operation Elbrus, conducted with assistance from ATO investigators, culminating with 28 search warrants in Sydney, Wollongong and the Southern Highlands.
The outsourced payroll management service company left hundreds of IT contractors around the country without wages for weeks after its accounts were frozen by the Australian Taxation Office (ATO) in late April, prior to the AFP’s disclosure of the investigation and its outcomes.
Plutus Payroll, along with a number of associated entities were placed into administration after the investigation wrapped up.
David Ianuzzi and Vincent Pirina from Veritas Advisory were appointed as joint administrators of Plutus Payroll Australia on 6 June, just weeks after the alleged director of the company was arrested in the far reaching tax fraud case.
Tim Norman, Salvatore Algeri and Eddie Senatore from Deloitte were subsequently appointed as joint and several provisional liquidators of 10 companies by the Supreme Court of New South Wales on 9 June 2017, following an application made by the Deputy Commissioner of Taxation.
Now, the Supreme Court of NSW in Sydney has found that Plutus Payroll and at least 10 associated businesses had been trading insolvent and, as such, ought to be wound up.
A decision handed down by NSW Supreme Court Justice, Paul le Gey Brereton, on 9 October, ordered that Plutus Payroll and 10 of associated businesses be wound up, with Norman, Algeri and Senatore of Deloitte appointed as liquidators.
According to court documents, evidentiary certificates submitted to the Court establish that, as at 7 September 2017, the total outstanding debt due and payable by Plutus Payroll and the associated businesses that were taken to Court by the Commissioner of Taxation came to well over $130 million.
Of the entities, the outstanding debts for Plutus Payroll were listed at about $45.5 million, while associated business, PPA Contractors Australia, had an outstanding debt of $54.8 million, PP Australia claimed $8.1 million, and SAI Solutions Australia had debts of $3.7 million.
“The provisional liquidators have been able to reconstruct the balance sheet of the first defendant as at the date of their appointment (9 June 2017),” the Court’s decision stated.
“From that they have formed the view that there is a deficiency of at least $30 million, which (with other matters) founds their opinion that the first defendant is insolvent.
“While they have not been able to reconstruct the balance sheets of the second to tenth defendants, they have formed the opinion that they are likely to be insolvent, in the light of their having ceased to trade in late April or early May upon the execution of search warrants by the AFP, the cessation of funding from the first defendant [Plutus Payroll]…the apparent absence of cash and property, and the lack of accounting records,” it said.
While the AFP alleged that the fraud revolved around Plutus Payroll, it stressed that the company had been, in fact, a legitimate business that provided payroll services to its legitimate clients.
However, the money received from the client companies was allegedly transferred to subcontracted companies – alleged to be controlled by syndicate members – to process payroll.
While processing these payments, funds paid by legitimate clients to service tax obligations were allegedly diverted by the syndicate for their own personal gain, meaning that the tax dollars meant to be set aside for contractors paid via the company did not make their way to Australian Taxation Office (ATO).
In late May, however, the ATO released guidance confirming that workers who had been on Plutus Payrolls’ books would not be penalised if their pay as you go tax withholding (PAYGW) amount reported as being withheld was not actually paid to the ATO.