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Australia – Court rules Plutus Payroll IT contractors are not priority creditors

11 September 2019

New South Wales Supreme Court ruled that IT contractors who used the services of collapsed Australian-based payroll company Plutus Payroll are not priority creditors since they were not employees of the company.

Plutus Payroll is behind a conspiracy alleged to have defrauded the Australian Taxation Office of more than AUD 105 million (USD 72.0 million) in three years.

In 2017 it was found that Plutus Payroll had allegedly been funneling wage payments through several sub-contracted ‘second-tier’ companies. These companies were effectively operated by a crime syndicate that only paid a fraction of the required income tax according to Australian Federal Police (AFP). The scam had also impacted a number of labour hire firms that have outsourced their payroll operations to Plutus. 

According to CRN Australia, Plutus offered payroll services for free, an offer that appealed to contractors who typically pay a third party to technically employ them even though they contract to a third party. Such services see a payroll services provider pay superannuation and pay-as-you-go taxes, saving contractors from running their own affairs. But Plutus didn’t pay the tax to the ATO and it is alleged its principals pocketed it instead and used the cash to fund lavish lifestyles.

The company collapsed in May 2017, which left several hundred former clients owed wages and/or superannuation payments. Liquidators have worked on the case ever since, including running a case to figure out if Plutus clients should be considered employees, who are considered priority creditors, or contractors who as unsecured creditors go down the list if and when any payments are made.

The decision found that as many never of the IT contractors never worked at Plutus offices, were managed by Plutus staff, or filed annual or sick leave requests with Plutus, that they can’t be considered employees of Plutus.

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