Kirk (in his capacity as liquidator of ARG Workforce Pty Ltd (in liq)) v Commissioner of State Revenue, in the matter of ARG Workforce Pty Ltd

This Federal Court case is about whether a liquidator could recover payroll tax payments made by two insolvent companies to the Queensland Revenue Office, represented by the Commissioner of State Revenue. The court declared the payments were unfair preferences, insolvent transactions and voidable transactions, and ordered repayment of more than $2.8 million plus interest.

The key dispute was narrower than that headline suggests. It was common ground that the payments were voidable. The real contest was whether the Commissioner could rely on the defence in s 588FG(2) of the Corporations Act. The court held that the defence was not proved.

ARG Workforce Pty Ltd and ARG Payroll Pty Ltd were part of the wider ARG group and operated a labour hire services business. The liquidator was appointed on 2 February 2022. During the six months before that date, Workforce made a series of payments to the Queensland Revenue Office totalling $2,474,375.01, and Payroll made payments totalling $345,791.57.

The background to those payments was important. In July 2019, the Victorian State Revenue Office sent information to Queensland under a Phoenix Taskforce arrangement. That information concerned ARG Labour Services Pty Ltd and associated entities, including some entities already in liquidation. QRO officers explained that the information-sharing arrangement related to suspected phoenixing activity, and they understood phoenixing to include shutting down companies through deregistration, voluntary administration or liquidation to avoid liabilities.

After receiving that referral, QRO officers began reviewing the ARG entities. Internal work included checking registration status, considering grouping issues, investigating whether payroll tax should have been paid, and taking steps to crystallise liabilities. By mid-December 2019, Workforce and Payroll had been registered for payroll tax and were the subject of notices of assessment.

The evidence also showed active debt and enforcement preparation. ASIC alerts were placed on relevant companies. QRO officers discussed briefing the collections team early so bank account details could be obtained if garnishee action was needed. Notices were issued to banks for Workforce records, and Westpac provided statements showing substantial account activity, with many credits described as cash flow finance. Internal notes then recorded that the statements were suitable for garnishee action.

On 10 December 2019, default assessments were issued to Workforce, expressed to be immediately due. Around the same time, a QRO officer spoke with Mr Dennis Ting from the ARG group about the large payroll tax liability and whether a payment arrangement would be required. He indicated that a payment arrangement would more than likely be needed.

When the companies later entered liquidation, the liquidator sought to recover the payments made during the six-month relation-back period. The Commissioner did not dispute that the payments were voidable transactions. Instead, the Commissioner argued that the court should not make repayment orders because the statutory defence in s 588FG(2) was available.

The legal issue was commercially important but quite focused. Because the parties accepted that the payments were voidable transactions, the court had to decide whether the Commissioner could resist repayment under s 588FG(2) of the Corporations Act.

As set out in the judgment, that defence required proof that the person became a party to the transaction in good faith, and that at the relevant time the person had no reasonable grounds for suspecting insolvency or future insolvency of the relevant kind. It also required that a reasonable person in the same circumstances would have had no such grounds, and that the person had provided valuable consideration or changed position in reliance on the transaction.

There was no dispute that the transactions were not unfair loans or unreasonable director-related transactions. The liquidator also accepted that the QRO had provided valuable consideration. So the real contest was about good faith and suspicion of insolvency, both actual and objective.

This is where the case becomes especially useful for business readers. The court's decision did not turn on a broad proposition that a revenue authority can never rely on the defence, or that ordinary tax administration automatically creates suspicion of insolvency. The published material shows that the court focused on whether the Commissioner had actually proved the defence on the evidence before it. That included what the relevant officers knew, what the records showed, and whether the evidence was sufficient to satisfy the court about the required elements.

The court found for the liquidator. It declared that each payment listed in the schedules to the orders was an unfair preference under s 588FA, an insolvent transaction under s 588FC, and a voidable transaction under s 588FE. It then ordered the Commissioner to repay $2,474,375.01 to Workforce and $345,791.57 to Payroll under s 588FF(1)(a), together with interest. Costs were also ordered against the Commissioner.

The judgment also records a key factual finding that each of Workforce and Payroll had been insolvent from 30 June 2019. That finding meant the payments later made within the six-month period before liquidation were vulnerable to recovery, subject to any available defence.

The published catchwords and introductory reasoning explain why the defence failed. The court held that the good faith defence under s 588FG(2) was not made out. Importantly, the reason was not framed only as a criticism of general debt recovery conduct. The court said the defendant called witnesses who had no recollection of the salient events, and that the witness evidence and documents tendered did not provide a satisfactory basis from which the court could be satisfied that the defence had been established.

That point matters. A creditor does not prove this defence merely by showing that it was acting through ordinary systems or standard procedures. The court must be satisfied, on the evidence, about the required state of mind and the absence of reasonable grounds for suspicion. On the published material, the Commissioner did not discharge that burden.

The judgment gives a useful picture of the kinds of records that can become important in a preference case. QRO's electronic revenue management system recorded interactions between officers and debtors, and officers were required to record those interactions electronically so other officers could follow up with knowledge of what had previously occurred.

The evidence referred to a range of internal and external material, including the Victorian referral under the Phoenix Taskforce arrangement, ASIC alerts, internal emails about review and assessment steps, discussions about obtaining bank account details for possible garnishee action, notices to banks for records, bank statements, and communications with the companies' representative about registration, assessments and possible payment arrangements.

Some of the internal messages were commercially significant. They referred to revenue risk, the possibility of garnishee action, the need to action recovery as soon as possible, and concern about how to approach the matter. The bank statements obtained for Workforce showed substantial account activity and repeated credits described as cash flow finance. The court also recorded that by 10 December 2019 default assessments had been issued to Workforce and that a QRO officer had raised with Mr Ting whether a payment arrangement would be required because of the size of the liability.

For business owners, the practical point is that insolvency disputes are often built from ordinary operational records. Emails, call notes, system entries, bank statements, registration forms and assessment notices can all become evidence of what was known and what should reasonably have been suspected at the time.

If your business is under financial pressure and paying overdue tax debts, this case is a reminder that those payments may not be safe if liquidation follows. The companies here continued making substantial payments to a revenue authority in the six months before liquidation, but those payments were later clawed back.

The case is also a warning about timing. The court found insolvency from 30 June 2019, well before the liquidator's appointment in February 2022. Directors often focus on the final collapse, but preference risk can arise much earlier. If your business is relying on short-term funding, making catch-up payments to old creditors, or negotiating around tax arrears while struggling to meet current liabilities, that is a point to get advice.

For groups with multiple entities, the judgment also highlights payroll tax grouping and cross-entity risk. The QRO material referred to associated entities and the possibility that group members could be jointly and severally liable for payroll tax. Businesses operating through several companies should not assume that entity separation alone will contain payroll tax exposure.

For creditors, including government creditors, the case shows that a later defence depends on evidence, not assumptions. If you want to rely on good faith and lack of suspicion, you need clear contemporaneous material showing what was known, what was considered, and why there were no reasonable grounds to suspect insolvency. General evidence about ordinary practice may not be enough.

Does this mean paying tax is pointless if a company is in trouble? No. Businesses still need to deal with tax obligations seriously. The point is that if a company is insolvent and later goes into liquidation, some payments made during the relevant period may be recoverable by a liquidator.

Can a government agency be treated like any other creditor in a preference claim? In this case, yes. The court made repayment orders against the Commissioner of State Revenue. The fact that the creditor was a revenue authority did not prevent the liquidator from succeeding.

Is the good faith defence easy to prove? Not necessarily. This case shows that the defence can fail if the evidence does not satisfactorily establish the required elements. The court focused on the actual proof available, including the lack of recollection from witnesses and the limits of the documents tendered.

What should directors do when tax debts are mounting? Directors should treat that as a solvency issue, not just a tax administration issue. Early advice can help assess whether the company can continue trading, how to deal with creditors consistently, and what records should be kept.

The judgment was delivered by Goodman J in the Federal Court of Australia on 4 March 2026. The hearing took place on 2 and 3 December 2025. The liquidator had been appointed on 2 February 2022, which was the relation-back day used for the six-month voidable transaction period identified in the judgment.

This page explains the decision as a practical case note. It focuses on the findings and conclusions clearly stated in the published judgment text.

This explainer is based on the Federal Court judgment in Kirk (in his capacity as liquidator of ARG Workforce Pty Ltd (in liq)) v Commissioner of State Revenue, in the matter of ARG Workforce Pty Ltd [2026] FCA 192.

The published text available for this page includes the orders, catchwords, introduction and substantial factual findings. Because the available text is truncated before the full reasons are reproduced, this page does not go beyond the findings and reasoning points that are clearly stated in that published material.