Royal Wins faces liquidation amidst unpaid salary and tax obligations
Royal Wins, an Australian mobile developer of betting games listed in the US and Canada, has been facing legal challenges from a former employee aiming to recover unpaid salary, superannuation, and annual leave. The employee’s demands led to a court-ordered winding up of Royal Wins’ local operations.
Operating out of Sydney until mid-2022, Royal Wins developed popular games such as Kash Karnival, a skill and wagering platform. The Supreme Court of NSW ordered the liquidation of its Australian entity following several unassessed creditor claims, including the largest claim of approximately $3.2 million from the Australian Taxation Office (ATO).
The trouble began when an ex-employee, owed nearly $40,000 and unpaid for a year, sought payment for the period between April and June 2022, coinciding with the termination of most Australian staff by the company. When Royal Wins failed to comply with the payment demand, the individual sought court intervention to wind up the company.
In June, the NSW Supreme Court appointed Rapsey Griffiths Turnaround & Advisory as the liquidator for Royal Wins. However, the company refrained from making any public statements in response to media inquiries.
Regarding unpaid superannuation, the ATO has the authority to impose penalties, and directors of companies can be held personally liable if the minimum super for employees is not paid on time and to the appropriate fund. Moreover, the ATO can order directors to pay the super guarantee charge, an amount exceeding the regular super, and is not tax-deductible.
Due to delayed filing of audited accounts for the 2022 financial year, Royal Wins’ shares have not been traded since November. Additionally, accounts for the six months ending on December 31, 2022, have not been filed. Royal Wins attributes the delay to a change in auditor in August 2022, after discovering errors related to a substantial tax obligation owed to the ATO, resulting from research and development claims from 2016 and 2017. The company’s June 30, 2022 accounts, filed in April, disclosed a tax obligation of $2.7 million.
Apart from the tax obligation, Royal Wins also owes $696,000 to a contractor responsible for renovating its Australian offices and $132,000 in lease payments. Curiously, despite the termination of its local workforce, the company has not utilized the office space.
According to its accounts, Royal Wins has not actively promoted its Kash Karnival game since the end of the last financial year.
The appointed liquidator, Mitch Griffiths, has initiated investigations, and at present, creditor claims amount to $3,281,652. However, this figure may change as the liquidation process progresses. The ATO is among the creditors, with a claim totaling $3,225,520.
Previously, Royal Wins had registered research and development (R&D) activities, but an internal review by Industry Innovation and Science Australia (IISA), prompted by the ATO, revealed that many of the claimed activities did not qualify as R&D. The Administrative Appeals Tribunal upheld this decision, stating that the company had not demonstrated that the outcomes of the claimed R&D activities could not have been known or determined in advance based on existing knowledge and expertise, including standard software testing methods.
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