Rugby Australia exposed to Melbourne Rebels tax debt, PwC lawyers claim, as $30m battle heats up

Rugby Australia could be exposed to the full weight of a $11.5m tax debt, after the Melbourne Rebels franchise collapsed, lawyers from PwC claim.

Rugby Australia Chair Daniel Herbert with CEO Phil Waugh. Photo by Morgan Hancock/Getty Images

Rugby Australia could be exposed to the full weight of a $11.5m tax debt, after the Melbourne Rebels franchise collapsed, lawyers claim.

RA should be held “jointly or severally liable” for the multi-million tax bill, state Gilbert and Tobin lawyers who are acting for the Melbourne Rebels’ administrators, PwC.

The former Melbourne Rebels board are currently engaged in a legal battle with RA in the Federal Court, where they are seeking $30m in damages from the governing body.

Earlier this year the Rebels were placed in voluntary administration with debts owed to creditors exceeding $23 million, including the $11.5m debt to the Tax Office.

Gilbert and Tobin, the lawyers for the Rebels’ administrator PwC, wrote to the Rebels lawyers in early November to “outline the Deed Administrator’s position on the ATO’s claims in relation to the unpaid PAYG withholding tax.”

The Melbourne Rebels were placed in voluntary administration earleir this year. Photo: Getty

In a letter seen by The Australian, PwC has “sought and obtained” information from the ATO and Gilbert And Tobin lawyers state RA is “jointly or severally liable for the PAYG withholding liability”. PwC lawyers also confirm, which the Rebels have long stated, that they were operating as ”partners” with RA.

“I am pleased to see that aspects of the Directors’ tax analysis (particularly the conclusion that there is a partnership with RA for PAYGW purposes) has been adopted by the Deed Administrators,” the letter from Gilbert and Tobin reads. “The fact that there is joint and several liability on the part of RA and MRRU for PAYGW has, of course, implications for other aspects of this matter.”

RA have dismissed the assertions made and referred to a statement they released in October. Back in October RA claimed the Rebels’ decision to launch legal action was the Melbourne club’s directors attempt to “shift blame for their financial mismanagement”.

The Australian understands RA will again be pushing back on the latest claims.

RA has long claimed the Rebels directors are solely responsible for the tax debt which has always been denied by the Melbourne club’s leadership.

RA has previously claimed the Rebels are attempting to “shift blame for their financial mismanagement” of the club.

Before the Rebels’ collapse, the governing body had been seeking a private equity deal to supercharge its finances, but was unable to seal a deal.

RA instead set up an $80m loan with Pacific Equity Partners, most of which has now been drawn down.

However, the British and Irish Lions tour of Australia in July next year - their first visit here in 12 years - was expected to be a cash cow for RA to clear some of its debts. They were also holding out hope of major windfalls for the World Cups, with the mens’ competition held here in 2027 and the womens’ in 2029.

However, the collapse of the Rebels and financial problems at the Waratahs have derailed RA’s plans.

RA chairman Daniel Herbert said when shutting down the Rebels in May that the club had already received almost $14m in bailouts in 2017, with the debts just getting worse.

“There’s been tens of millions of dollars that has been spent on this franchise over and above other Super Rugby clubs, and (now its) to be $23 million in debt again,” Herbert said during a press conference at Melbourne’s Rialto tower.

The Rebels have floated a “$18m plan” to move the Melbourne team from its costly home base at AAMI Stadium out to Tarneit in the city’s west in a bid to save the team.

RA is due to file their defence on Thursday. The case was due back in the Federal Court on December 20.