The taxpayer is set to wear a heftier price tag from failed companies after a landmark ruling on employee entitlements.
In a key Supreme Court of Victoria ruling this week, Justice Ross Robson found the receivers to the company Amerind should not reimburse $3.8 million to the Commonwealth as a priority creditor.
![Employment minister Senator Michaelia Cash: The ruling on employee entitlements reimbursement will cost the government.](/web/20170326223312im_/http://www.theage.com.au/content/dam/images/g/t/1/f/f/0/image.related.articleLeadwide.620x349.gv5o7p.png/1490336827622.jpg)
The government will now have to wait alongside other creditors if a company operated by a trust collapses.
Employment Minister Michaelia Cash said, "the government is considering the implications of this decision."
"The government remains committed to strengthening measures to prevent employees and taxpayers are not left out of pocket as a result of corporate failure or mismanagement," Minister Cash said.
Trust hollows out fair entitlement guarantee claims
Under the fair entitlements guarantee, the government picks up the tab for unpaid employee entitlements if a company goes under. The government then ranks as a priority creditor over other creditors to get reimbursed for the payment.
But the highly complex matter before the court related to how money held by a trust that operates a company should be distributed to creditors in an insolvency event.
The court found that Amerind was carrying on business solely as a trustee for the Panel Veneer Processes Trading Trust, and all assets were held in the trust.
"The court finds that the proceeds of the sale of the trust assets were not 'property of the company'...and are not subject to the priority regime," Justice Robson said.
The ruling will not impact fair entitlement guarantee claims for companies that are not operated by a trust.
Receivers were appointed to Amerind in March 2014 by Bendigo and Adelaide Bank. At the time of the appointment, the business had 174 employees.
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