Here's the AFr article:As Department of Finance head Jenny...

Here's the AFr article:

As Department of Finance head Jenny Wilkinson was issuing new guidelines last month for Commonwealth tenders to consider governance concerns, the Tax Office was doubling down on its commitment to troubled tech stock Nuix with a whopping $6.8 million contract extension.

Nuix and its board is facing civil action from ASIC over what the corporate regulator says was breaches of directors’ duties and continuous disclosure obligations. ASIC also has an insider trading investigation over shares traded by Nuix CEO Jonathan Rubinsztein announced publicly to the market in May of this year. Then there’s the class action over the 2020 prospectus.

Nuix CEO Jonathan Rubinsztein will be buoyed by the ATO’s support for the embattled company. Nine

The ATO also has some Nuix-related history, after securing a conviction against former chairman Tony Castagna in 2018 which was overturned by the Court of Appeal in 2019.

Early this year tax investigators examined R&D claims made by Nuix which were questioned by auditor PwC ahead of the company’s $1.5 billion IPO in 2020, but took the matter no further.

The controversies, along with questions over Nuix’s financial reserves reported by The Australian Financial Review in February, has seen government contracts slow, with the AFP, DFAT and other departments opting for 12-month contracts totalling $607,000 since January.

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Nuix’s previously biggest customer, ASIC, is still considering an alternative supplier for when its current contract with Nuix expires next February – a decision is said to be close.

The risk is that in the worst case if Nuix collapsed, clients could struggle to regain their data locked in Nuix files, even if they had taken precautions.

The ATO took a different tack, filing a notice on June 18 that it had signed a three-year extension with Nuix stretching from last March to February 2026.

The $6.8 million price tag is a 22 per cent increase on the $5.6 million it paid from 2020 to 2023 – in line with last year’s price rise.

Technology costs are a bit of a sore point at the ATO, given the billion-dollar blowout in the Australian Business Registry Services program under review by former Service NSW chief Damon Rees.

Nuix will have been heartened by the ATO’s faith in the company. But not heartened enough to cancel plans to shed another 15 jobs in its technology and product teams last month.

Nuix is facing a tricky road. It reported $37.1 million cash on December 31. In January it faced a $US6.25 million first payment for the Topos Labs acquisition announced last September, and Nuix is due to pay another $US12.25 million next January plus a conditional payment if Topos milestones are met.

There’s another $US2 million due as part of its May acquisition of the Rampiva group. In Australian currency that’s $31 million in total outlays by next January, with a business that has been burning about $5 million every half year, in part from hefty continuing litigation costs.

That suggests without a surge in new revenue Nuix must be looking either at raising new capital or debt, or alternatively drastic cost-cutting. On the positive side of the ledger, Nuix won its case against former CEO Eddie Sheehy’s $183 million options claim in January. That’s now going to appeal.

All in all, it promises to be a white-knuckle ride for Nuix shareholders. And with customary brio, the Tax Office has bought itself a first class ticket on the train.