Banned NDIS provider Cocoon SDA Care’s Zaffar Khan’s private ATO legal war exposed

A banned NDIS provider has been embroiled in a legal war with the tax office that has left many out of pocket with a tax bill now worth millions of dollars.

EXCLUSIVE: The man behind banned NDIS provider Cocoon – which went under in May leaving debts of $52 million – was once accused of failing to pay hundreds of thousands of dollars in tax and workers’ superannuation in a previous company collapse.

This masthead can reveal the Australian Taxation Office sued Zaffar Khan in 2017, seeking more than $650,000 of allegedly outstanding income tax, withholding tax and retirement contributions.

In an unrelated action, the ATO is now the biggest creditor in the Cocoon wreck, owed about $10m.

Documents obtained from Queensland’s District Court show that in 2017 Mr Khan denied tax office accusations of failing to pay the correct amount of income tax for nine years. The total income tax debt it alleged was $324,000.

Mr Khan, who is described as Cocoon’s co-founder and “corporate strategist”, was also accused of being responsible for $247,000 in unpaid withholding tax for a company called Medical Centres & Property Developments.

Cocoon SDA Care’s co-founder and “corporate strategist” Zaffar Khan. Picture: Supplied

Mr Khan was a director of Medical Centres & Property Developments, which went into liquidation in 2016. The company owed the ATO more than $1m, according to the minutes of a creditors meeting obtained from the corporate regulator.

It is unclear why the amount being pursued in the liquidation was a different to sum.

Court documents show the worker superannuation bill the ATO hit Mr Khan with was $53,000. And it sought to impose an interest charge of $31,000.

In response to the tax office legal action, Mr Khan quickly denied any wrongdoing in a defence document.

He said other people were responsible for the alleged failure to prepare and lodge business activity statements and pay withholding tax.

Mr Khan said that for two and a half years, these people told him “the company was meeting all of its taxation and superannuation obligations.”

Mr Khan said in his defence that he “took all reasonable steps” to comply with the rules.

The Australian Taxation Office sued Zaffar Khan in 2017, seeking more than $650,000 of allegedly outstanding income tax, withholding tax and retirement contributions.

The matter was hotly contested for a further two and a half years. This included the ATO filing a 232-page document containing Mr Khan’s original notices of assessment for 2007 through 2016, as well as amended assessments.

In one year, Mr Khan’s initial taxable income was zero. In the amended assessment, it was $164,000.

Then, on October 19, 2020, Mr Khan entered into a personal insolvency agreement.

Two days later, the ATO discontinued its suit, after accepting the personal insolvency agreement.

Mr Khan’s bankruptcy trustee was contacted for comment on how much the ATO received following the agreement.

The ATO declined to comment, citing taxpayer confidentiality restrictions.

Mr Khan did not respond to repeated requests for comment.

Zaffar Khan entered a personal insolvency agreement in 2020. Picture: Supplied

Unrelated to the District Court legal action, details of Cocoon’s debt to the ATO were revealed by the company’s independent auditor.

In a report attached to the 2024 financial statement of Cocoon’s parent entity, Horizon SolSolutions, the auditor said “the company owed $9,546,902 to the Australian Taxation Office and was issued with a bankruptcy notice. However, management successfully negotiated a payment plan approved by the ATO in November 2024, and the default judgment was set aside in October 2024.”

Horizon traded as Cocoon.

Horizon called in liquidators a month ago, after the group was banned from the NDIS for “serious misconduct.”

In 2023 and 2024, Horizon was paid about $100m of public money, according to its financial statements.

Originally published as Banned NDIS provider Cocoon SDA Care’s Zaffar Khan’s private ATO legal war exposed