ABSTRACT

When a company is wound up not all debt will be met from the realization of the company’s assets and, as discussed in Chapters 4 and 5, the Corporations Act 2001 (Cth) in Australia has chosen some creditors to be legitimately favoured for payment by the liquidator. Taxation and other money owed to governments might be expected as a statutory priority – the government has law-making power and so can readily give itself priority. One could expect either insolvency statutes or taxation statutes to contemplate what is to happen to unpaid taxes or other government debts when a company experiences insolvency. In Australia, however, the operation of a federation between the States and Commonwealth complicated that expectation. Later, the fiscal need for more distributions to be made to unsecured creditors expedited a removal of the government’s priority.