Readers will be aware that superannuation has priority employee status in corporate appointments, and a slightly more limited priority in personal insolvency appointments. This article is not about those priorities as we have written about them previously.
Coincidentally we have two corporate files where the question of who may lodge a proof of debt for superannuation has been raised and we have had to revisit section 553AB of the Corporations Act.
The basic position is that employers are required to remit superannuation contributions by July 28 each year and, if they do not do so, they should lodge a Superannuation Guarantee Statement with the ATO. The ATO generally then makes an assessment of unpaid superannuation, default or otherwise, and lodges a proof of debt for the Superannuation Guarantee Shortfall. That debt has priority as mentioned above.
In most cases this is how it works. But sometimes employees or their superannuation fund managers lodged proofs of debt for unpaid superannuation contributions and the liquidator has to deal with them. This led to section 553AB being introduced into the Act in 2007. The section reads:
553AB(1) In a winding up, the liquidator must determine that the whole of a debt by way of a superannuation contribution is not admissible to proof against the company if:
(a) a debt by way of superannuation guarantee charge:
(i) has been paid; or
(ii) is, or is to be, admissible to proof against the company; and
(b) the liquidator is satisfied that the superannuation guarantee charge is attributable to the whole of the first mentioned debt.
(2) If the liquidator determines, under subsection (1), that the whole of a debt is not admissible to proof against the company, the whole of the debt is extinguished.
Similar provisions apply where only some of the debt falls into the debt that may be proved by the ATO.
Section 553AB provides that outstanding superannuation contributions are not provable directly to the employee or their fund manager if those contributions form part of a superannuation guarantee charge assessed by the ATO. The ATO proof of debt takes absolute precedent. This solves the issue of two parties proving for what is essentially the same debt – albeit that the ATO debt is generated under the relevant statute and technically is not exactly the same debt. This provision eliminates ‘double-dipping’ for superannuation.
In our two cases an industry fund lodged proofs of debt for outstanding superannuation contributions. The first case was pretty easy to resolve. The ATO had already lodged a proof of debt for the superannuation guarantee charge and that proof of debt included claims made by the employees in the fund manager’s claim. We could easily reject that part of the claim and the fund manager withdrew it once we advised them that the ATO had lodged a claim in relation to the relevant employees.
The second is more problematic. The superannuation fund was owed the contributions, but the ATO did not lodge a proof of debt in relation to these employees when we declared a priority employee dividend. We have asked the ATO again to lodge one so that we can deal with it, and hence also reject the proof lodged by the fund manager. But what if the ATO doesn’t lodge a proof of debt?
The outstanding superannuation contributions should fall under claims that should be made under the superannuation guarantee charge. That being the case they would be claims that “is, or is to be, admissible to proof against the company”. That leads to the conclusion that the fund manager’s claim “is not admissible to proof against the company”. On the other hand, if the ATO does not think that these debts fall under the provisions of the superannuation guarantee charge, we could determine that the debt is not one that “is, or is to be, admissible to proof against the company”.
If the ATO does not lodge a claim, or we cannot get confirmation that the contribution do not fall under the superannuation guarantee charge provisions for some reason, we will be off to seek directions. If that is the case, we will let you know the decision.