Australian Taxation Office forced to accept steep losses in rescue deal of M.J. Harris Group subsidiaries

The tax office has been forced to settle for just a fraction of the more than $6m they are owed from the insolvency of a number of subsidiaries of Melbourne home renovation company M.J. Harris Group.

The tax office has been forced to swallow a rescue deal for an up-market home renovator. Picture: Instagram

The tax office has been forced to swallow a rescue deal for an up-market home renovator which gave its director back half his debt while it had to settle for just 5c on the dollar.

The $5m plus financial hit to the Australian Taxation Office flowed from the collapse of two companies within Melbourne home renovation company M.J. Harris Group.

The subsidiaries, 617 503 483 Carpentry, which traded as M.J. Harris Carpentry, and 159 787 783 Painting, which traded as M.J. Harris Painting, entered administration last year.

The M.J. Harris Group website says it focuses on “delivering Melbourne’s finest home restoration services”.

“We are a fully integrated design and construction company who are focused on the mid-to-high-end residential sector,” it says.

“With in-house designers, architects, engineers and all trades necessary for quality renovations, our work is made efficient and lasting.”

The M.J. Harris Group website says it focuses on “delivering Melbourne’s finest home restoration services”. Picture: Instagram

M.J. Harris Carpentry collapsed owing unsecured creditors more than $5m, reports lodged with the corporate watchdog reveal.

This included $4.2m to the tax office, $39,947 to trades and $1.1m to related party creditors.

Employees were listed as being owed $556,263, the majority in superannuation, bringing total liabilities to $5.9m.

M.J. Harris Painting collapsed owing $2.8m to the tax office, $2,409 to trades, $209,157 to employees as part of total liabilities of $3.4m.

Administrator Rajiv Ghedia of Westburn Advisory alleged both companies may have traded while insolvent – meaning the businesses may have taken on new debts knowing they couldn’t pay them back – since June 2020.

“It is my preliminary opinion that the company was trading whilst insolvent from at least 30 June 2020 onwards, based upon a cash flow and balance sheet test of insolvency,” he said.

Corporate records show unsecured creditors were forced to accept a settlement deal put forward by director Michael Harris for both businesses which returned them 5c on the dollar for debts of $7.1m.

The tax office is listed in the settlement as an unsecured creditor owed $6.7m.

At the same time, related-party loans totalling close to $770,000 owed to Mr Harris and M.J. Harris Group will be repaid at 50c on the dollar.

Employees will be paid out in full.

Company records show Mr Harris is the sole director of M.J. Harris Carpentry, M.J. Harris Painting and M.J. Harris Group.

All companies list M.J. Harris Investments as their shareholder.

The deal was opposed by the ATO which noted the low return and a three-year payback period.

The ATO also said while the director had blamed the company’s financial woes on Covid, its tax debt “began occurring prior to the Covid-19 lockdowns”.

A vote on a settlement resulted in a deadlock, handing power to the administrator to cast a deciding vote.

Mr Ghedia passed the settlement, saying unsecured creditors ran a real risk of getting nothing if the company was tipped into liquidation.

The deal was opposed by the Australian Taxation Office, an unsecured creditor. Picture: Instagram

He said the rescue deal would allow the companies to continue to trade to pay off their debts.

He also noted Mr Harris had struck a deal with the tax office separate to the rescue deal in which he had agreed to repay $2.7m.

Control of the companies reverted back to Mr Harris after the deal was passed.

The Herald Sun have spoken to a number of M.J. Harris customers and suppliers who have run into issues dealing with the group.

A Melbourne family who signed up with the M.J. Harris Group for a home renovation told the Herald Sun they were out of pocket $40,000 after extensive delays and unfinished works.

Their $500,000 renovation kicked off in May 2023, with an estimated end date of September 2023.

“It was meant to take four months — now we’re here a year and a half later,” he said.

“We rented an Airbnb for four months, but soon after we were told that construction was delayed and then we had to move into mum and dad’s place. And then it just kept snowballing.

“It was just broken promise after broken promise.”

The customer said he then discovered that the money paid by the couple had not been passed onto suppliers.

“I lost it. I went to (the) office and demanded that (they) pay the suppliers – kitchen suppliers, appliance suppliers – then and there, in front of me,” he said.

After no further work was done on his home, the customer then took M.J. Harris Group to the Domestic Building Dispute Resolution Victoria where it was agreed the company would pay him $33,000 over three instalments.

A Melbourne family who signed up with the M.J. Harris Group for a home renovation told the Herald Sun they were out of pocket $40,000. Picture: Instagram

He is yet to receive any money.

“The mental toll is unimaginable,” he said.

M.J. Harris Group told the Herald Sun they have an ongoing business relationship with the customer.

A letter from the DBDRV confirmed the owners told the commission that the “builder breached the agreement by not rectifying issues or paying the agreed liquidated damages costs”.

“On 26 November 2024 the builder notified DBDRV that he was having cash flow issues,” it stated.

Architectural steel doors and windows supplier All Steel Designs director Laura Karefilakis told the Herald Sun that she had previously taken M.J. Harris Group to VCAT over an unpaid job.

VCAT ordered M.J. Harris Group to pay Ms Karefilakis’ business $11,438 last year. M.J.

Harris Group say the matter is now resolved.

“We did a project for them in Brunswick and (they) refused to pay the bill, raising a small discrepancy on the handle on one of the doors,” Ms Karefilakis said.

“We said we’ll replace the handle, but we need our bill paid. And (they) refused.

“I changed the company’s payment policy after this, so that people have to pay fully before installation. With so many builders going under, we can’t risk it.”

Lawyers acting for M.J. Harris Group stated that the matters before VCAT and the DBDRV were unrelated to the administration of 617 503 483 Carpentry and 159 787 783 Painting.

Mr Ghedia said Mr Harris attributed the company’s insolvency to an increase in the costs of material and labour, as well as the Covid pandemic which disrupted trade and resulted in project delays.

But Mr Ghedia said poor cash management, including the intermingling of funds within the M.J. Harris Group resulting in several related party loans, high cash use and poor record keeping including little to no use of budgeting and forecasting reports also contributed to its collapse.

Originally published as Australian Taxation Office forced to accept steep losses in rescue deal of M.J. Harris Group subsidiaries