A recent decision of the Supreme Court of New South Wales shows how quickly tax recovery action can collide with the purpose of voluntary administration.

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In **In the matter of Hudson Global Resources (Aust) Pty Limited [2026] NSWSC 535**, the Court considered what should happen where the Australian Taxation Office had issued a garnishee-style notice before voluntary administrators were appointed, and that notice continued to divert cash after the company entered administration.

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The decision matters because voluntary administration is often a race against time. If a business cannot keep trading long enough to test a restructure, sale or deed of company arrangement, the process may collapse before creditors have any real prospect of a better return.

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What happened? 

Hudson Global Resources was a national recruitment and labour hire business. Before the administrators were appointed, the ATO issued a notice to Hudson's invoice financier under section 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth).

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The notice required the financier to remit 20% of relevant drawdowns to the Commissioner of Taxation, up to a significant tax debt. After the administrators were appointed, that diversion of funds continued to affect the cash available to trade the business.

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The administrators applied urgently to the Court. Their practical problem was straightforward: if 20% of drawdowns continued to be redirected, they said the administration would be left without the cash needed to keep the business trading and preserve value for creditors.

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The legal issue 

The administrators argued, among other things, that the ATO notice created a security interest and that its continued operation should be restrained by the statutory moratorium in section 440B of the Corporations Act 2001 (Cth). The Court accepted that the notice gave rise to a statutory charge in favour of the Commissioner. That was important because it meant the Commissioner was treated as a secured party in relation to the relevant property. But that was not enough for section 440B. 

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The Court held that the Commissioner was not, on the facts, "enforcing" the security interest merely by passively receiving payments made by the financier in compliance with the notice. Enforcement required something more active, such as a step to compel payment. That meant the administrators did not succeed on the section 440B argument. 

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Why the administrators still obtained relief 

The more important part of the decision is what happened next. The Court used its power under section 447A of the Corporations Act to modify how the voluntary administration provisions operated in the circumstances of the case. The practical effect was to suspend the operation of the ATO notice during the administration period.

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The reason was commercial and statutory. Voluntary administration is meant to maximise the chance that a company can continue, or if that is not possible, produce a better return for creditors than immediate winding up.

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If the ATO notice continued to drain cash from the business during administration, that purpose could be defeated. The Court was prepared to make orders that protected the administration process and preserved the prospect of a better outcome for creditors.

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What the decision means for businesses 

For directors, this decision is a reminder that tax debt and cash-flow pressure should be dealt with early. Once the ATO has issued recovery notices, those notices may continue to have real practical consequences even if the company later enters voluntary administration.

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For administrators, the decision provides a possible pathway for urgent relief where a pre-appointment ATO notice is diverting the cash needed to trade on. But the pathway is not automatic. The application will need evidence showing why the diversion of funds threatens the administration and why suspending the notice is likely to preserve value for creditors.

For financiers and other third parties who receive ATO notices, the decision also matters. A notice recipient may face its own compliance risk, so any court orders need to deal clearly with what the recipient must, or need not, do during the administration.

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Practical takeaways 

1. A voluntary administration does not automatically neutralise every tax recovery step already in place.

2. An ATO garnishee-style notice may create a statutory charge, but passive receipt of payments may not be enough to amount to "enforcement" for section 440B.

3. Section 447A may provide a practical route to suspend the operation of a notice where it would otherwise undermine the purpose of voluntary administration.

4. Timing matters. Administrators should move quickly if continued remittances will damage the ability to trade on.

5. Evidence matters. The Court will need a clear picture of cash flow, creditor impact, employee entitlements, funding arrangements and why the proposed orders improve the administration outcome.

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Final point 

This decision is useful because it focuses on what voluntary administration is meant to achieve. The question is not simply whether one creditor has a collection mechanism. It is whether the administration can preserve enough cash and time to test whether a better outcome is available.

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For businesses under pressure, the lesson is simple: do not wait until recovery action controls the cash flow. Early advice can preserve options. Delay can turn a restructuring question into a shutdown question.

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General information only. This article is not legal advice and does not create a solicitor-client relationship. If your business is dealing with tax debt, creditor pressure or insolvency risk, obtain advice about your specific circumstances.

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Source Notes 

• In the matter of Hudson Global Resources (Aust) Pty Limited [2026] NSWSC 535, Supreme Court of New South Wales, Brereton J, 15 May 2026.

• Ironbridge Legal, "Cash or collapse: how administrators can block ATO garnishee notices", 22 May 2026.

• Mallesons, "A new precedent for administrators: s 447A relief against ATO garnishee notices", 25 May 2026.

• Gadens, "Changes to enforcement powers: NSW Supreme Court decision affects the ATO's ability to recover tax debts", 25 May 2026.