The pandemic has significantly impacted the way in which a trade creditor will interact with its customers, particularly when it comes to demanding payment from them. In many cases, a credit officer will do his or her job well by working with those customers who have been experiencing financial difficulty and collecting payment, including by way of instalments over time.

Conversely, up until recently, the ATO’s collection activity has been almost non-existent since the pandemic began in 2020. Around early April 2022, the ATO wrote to over 50,000 directors giving them 21 days’ notice to pay their tax liabilities, failing which a Director Penalty Notices may be issued.

This has been seen as a ‘warning letter’ on the part of the ATO.

Two recent Full Court of the Federal Court decisions have impacted the way in which preference claims are conducted referable to the application of the ‘peak indebtedness rule’, and the application of set-off under s. 553C of the Corporations Act 2001.

The Full Court of the Federal Court recently delivered its judgment in the matter of Badenoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) [2021] FCAFC 64.

The decision will undoubtedly have significant implications for the ongoing application of the peak indebtedness rule by creditors and liquidators.