Embattled payroll software company Plutus Payroll has promised its contractor customers that their frozen wages will be released within three days following legal action against the ATO.
Plutus asked the federal court to intervene in the matter late last week and review the ATO's decision to freeze Plutus' bank accounts following a dispute over money owed.
The freeze meant thousands of contractors who used the outsourced payroll service - many of them in the IT field - have not been paid since April 27.
It also forced Plutus to suspend operations while the company worked to resolve the dispute. It has accused the tax office of acting in a "draconian and unfair manner" and freezing its accounts without warning or consultation.
It took to the courts after the ATO refused a request to unlock Plutus' bank accounts.
However, the company last night informed customers that following the request for judicial review, the ATO had now agreed to release the withheld wages.
“Plutus Payroll is very pleased to advise that the ATO has agreed to allow the release of the wages owed to our contractors," it told customers.
"The ATO has written to the Commonwealth Bank today to ask that the funds be released."
Plutus said it expected the money to return to customer accounts within the next 72 hours.
It did not detail the reasoning behind the ATO's change of heart. The parties are due to appear back in court tomorrow morning.
Superannuation contributions have also been affected by the accounts freeze.
While March contributions had been paid by April 15, Plutus said, more recent contributions were still being withheld by the ATO.
"It is our intention to continue to discuss this issue with the ATO and have these amounts paid within the statutory deadlines," Plutus told customers.