ATO wins its bid to appoint liquidators to former Pallion Group company as GST chase drags on
A collapsed company related to Australia’s biggest gold refining group, Pallion, will have special liquidators appointed as part of the tax office’s decade-long chase for GST it says it is owed.
The tax office has won the right to appoint special-purpose liquidators to a collapsed company related to Australia’s largest gold and precious metals group, Pallion – the latest development in a decade-long battle with refiners over GST claims worth hundreds of million of dollars.
The ATO claims it is owed $28m in the matter at hand, and Federal Court Judge Scott Goodman late last month ruled that special-purpose liquidators be appointed to a company now known simply as ACN 607 537 548 – but previously known as ABC Refinery.
The company was placed in liquidation in November 2017, the judgment says, and was wholly owned by Pallion Group, headed up by Andrew Cochineas.
Pallion operates a suite of companies in the precious metals sector, including ABC Bullion, ABC Refinery and WJ Sanders, with its history dating back to the 1950s.
The money claimed to be owed to the ATO relates to notices of assessment issued to the company. However, the ATO would not comment specifically on what the debts entailed.
“The ATO cannot comment on the tax affairs of any individual or entity due to our obligations of confidentiality and privacy under the law,’’ a spokesman for the organisation said.
It is the latest development in a decade-long battle being waged by the ATO to claw back hundreds of millions of dollars in tax payments it says it is owed, but which gold refiners have disputed.
The ATO’s Serious Financial Crime Taskforce a decade ago started targeting fraud in the precious metals industry, with a loophole at the time enabling unscrupulous traders to claim tax benefits by buying GST-free gold bullion, refashioning it into scrap, and selling it, inclusive of GST, to a refiner.
“The seller then claims GST input tax credits by falsely stating the GST-free gold bullion was purchased inclusive of GST under the GST second-hand rules,’’ the ATO’s website says.
Refining groups such as Pallion were targeted by the ATO as part of the crackdown – unfairly, the industry says – and Pallion and its related entities have challenged the tax assessments issued to it.
Britain closed a similar tax loophole in 2003, but despite reportedly being warned about a similar weakness in the Australian system, the ATO did not move on the issue until 2013.
The ATO in 2020 lost a major case in its bid to press the matters, with the full federal court setting aside a previous Administrative Appeals Tribunal win against related former Pallion Group company EBS, in which the ATO was pursuing more than $200m in taxes and penalties it claimed to be owed.
The recent separate federal court judgment says that in late 2015, the company in question, ACN 607, entered into a transaction with EBS, which shared the same directors, “pursuant to which, amongst other things, it appeared to have obtained ownership of the business, goodwill and assets of EBS’’.
“As noted above, at the time of the September 2015 transaction, EBS was under audit as to its GST affairs.’’
EBS, in its matter pursued by the ATO, was hit with tax and penalty assessments in early 2016 worth more than $200m.
The full federal court in late 2020 handed EBS a big win, setting aside a determination by the AAT that it was liable for the taxes and penalties and sending the matter back to the AAT, “where it presently rests”, the recent judgment says.
“The hearing of the remitted matter occurred in May and June 2023,’’ the recent judgment says.
The recent judgment says that on September 1, 2017, ABC Refinery (Australia) changed its name to ACN 607 537 548, while another company owned by Pallion changed its name to ABC Refinery (Australia). “The company and ABC Refinery (Australia) entered into agreements pursuant to which it appears, amongst other things, that the company transferred all of its business, goodwill and assets to ABC Refinery (Australia),’’ the judgment says.
A liquidator was appointed to the company in November 2017, and began investigating.
“On February 14, 2018, the liquidator issued his second report to creditors,’’ the judgment says.
“In that report, the liquidator indicated that: he had undertaken some preliminary investigations; the September 2017 transaction may be a voidable transaction; and the company’s officers may have engaged in misconduct. The liquidator also stated that ‘related entities’ had proposed that he enter into a funding agreement with Pallion to cover the cost of investigating the notices of assessment.’’
A later report stated that the liquidator “had received a proposal from Pallion and Mr Andrew Cochineas to fund an investigation into the legitimacy of the notices of assessment and, if appropriate, to challenge those notices’’.
“The liquidator also noted that: Mr Cochineas had informed him that the company had previously obtained advice that the notices of assessment were incorrect and ought be challenged; and the outcome of such a challenge would determine whether the (Deputy Commissioner of Taxation) was a creditor of the company.’’
Earlier this year the liquidator of the company asked the ATO for indemnity in an initial amount of $150,000 “to enable the liquidator to obtain an independent valuation of the assets the subject of the September 2017 transaction, obtain counsel’s opinion and prepare a statement of claim against Mr Cochineas, the former directors and others’’.
The ATO has maintained, the judgment says, that the liquidator has a conflict of interest, as he was “effectively appointed by Mr Cochineas’’ and “had had pre-appointment contact on a number of occasions with Mr Cochineas’’.
Justice Goodman ruled late last month that special purpose liquidators be appointed to the company because “the September 2017 transaction warrants investigation’’.
“So much is clear from the liquidator’s repeated statements to that effect following his preliminary investigation.
“I was satisfied that there was an available perception that the liquidator, if funded to undertake the investigation, might be in a position of conflict in circumstances where: the liquidator had been funded by interests associated with Mr Andrew Cochineas to challenge the objection decisions; and part of the investigation will be, as the liquidator has identified, an investigation into the conduct of Mr Andrew Cochineas and interests associated with him.’’
The judge also notes that if the company were to be successful in its challenge to the ATO’s original assessment, the entire issue might go away.
Mr Cochineas’ personal website says Pallion “is known throughout the world as the largest precious metal services group in Australia”.
Pallion and Mr Cochineas declined to comment on the matter.
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