Liquidations & Receivership
A technical deep-dive into the "Specified Agent" rules, personal liability for liquidators, and the IRD's preferential status during insolvency.
When a business fails, its tax obligations don't simply vanish. For the liquidators, receivers, and administrators stepping in to manage the fallout, the GST rules become significantly more personal. Under the GST Act 1985, these insolvency professionals enter a unique legal category known as the Specified Agent.
Key Term: The Specified Agent
This category includes liquidators, receivers, voluntary administrators, and mortgagees in possession. In the eyes of the IRD, you become the person legally responsible for carrying on the taxable activity of the "incapacitated" entity.
The Personal Liability Trap
The most critical rule in any NZ liquidation is that the liquidator is personally liable for any GST liabilities that arise after their appointment.
You are generally not personally liable for the GST debts the company incurred before your appointment. Those stay with the company as a debt to the Crown.
If you sell company stock or assets to earn income, you must account for GST. If the company has no money left to pay, the IRD can pursue you personally.
Always ensure there are sufficient funds or "escrow" set aside to cover the GST on any assets you sell during the liquidation process. The IRD treats this as an absolute liability of the agent.
Priority of Payments (The Pecking Order)
In New Zealand, the distribution of assets is governed by Schedule 7 of the Companies Act 1993. The IRD holds a high-ranking preferential position compared to general suppliers.
Mortgagee Sales & Special Returns
When a lender (like a bank) exercises their right to sell a property (Mortgagee Sale), they are treated as a specified agent. They must:
- Determine if the defaulting debtor is GST-registered and if the asset was used for business.
- Issue the required "Special Return" (GST 103) if GST is applicable.
- Account for the GST to the IRD out of the sale proceeds before paying themselves the remaining debt.
If a liquidator sells land to another GST-registered person for use in their business, the CZR rules still apply. It is a 0% GST transaction, but must be correctly disclosed on the GST return to prevent audit triggers.
The "No Basis-Switching" Rule
To prevent practitioners from "gaming" the system for massive refunds, Section 58(1) of the Act prevents a specified agent from changing the GST accounting basis of the company. If the company was on a Payments Basis, you must continue paying GST as cash is actually received. You cannot switch to Invoice Basis just to artificially trigger large input tax credits on unpaid pre-appointment debts.
Frequently Asked Questions
Yes. Under Section 58 of the GST Act, a liquidator is a 'specified agent' and is personally liable for any GST that arises from the taxable activity they carry on after their appointment.
Yes. Fees for professional services are part of the taxable activity. You charge GST on your fee, and the company (as a registered person) can claim the GST portion as an input tax credit, effectively reducing the net cost to the estate.
Yes. Before de-registering the company, you must file a final 'wind-up' return. Any assets kept by shareholders or sold to third parties must have GST accounted for as a 'deemed sale'.
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