'Disagreement' over $1m tax debt led to cream puff venue closure, boss says

The chief financial officer of a popular Sydney yum cha restaurant says a family "disagreement" over how to handle more than $1 million in tax debt led to its shock closure, but that discussions to reopen are under way.

The 47-year-old Emperor's Garden restaurant in Chinatown suddenly closed in August amid scrutiny from the Australian Taxation Office (ATO) over unpaid bills.

The Hay Street institution was once known as a NSW Labor hangout but in recent years has attracted long queues for cream puffs sold cheap from a takeaway window.

Chief financial officer Valentine Yee, the son of owner Stanley Yee, said his cousin Lance Lai had unsuccessfully pushed for the Emperor's Garden company to enter voluntary administration after the ATO moved to wind it up, and then took possession of the building with a claim of unpaid rent to help protect the property from being seized.

"That was the theoretical best way to do it, but with my father being a very proud businessman and face-saving is the most important thing, he didn't think that was the best way to resolve it," Mr Yee said.

"The repossession … it's just a disagreement in approach in trying to resolve the ATO winding up application."

Mr Yee said the Emperor's Garden company had since reached an agreement to repay more than $1 million to the tax office, with about half that already paid, and started negotiating with Mr Lai to return to the site.

Part of the debt will be paid for by the sale of the Emperor's Garden BBQ and Noodles building on nearby Thomas Street.

Mr Yee said the Emperor's Garden restaurant and bakery had struck hard times with the construction of the George Street light rail, COVID and cost of living pressures.

"My father, he's run this business for many years quite successfully, he's always been a very responsible citizen and we always want to be a responsible citizen," he said.

"We just couldn't pay [the debt] off quick enough to stop the ATO from taking this action."

Valentine Yee said he was encouraging his father to cut the price of some food items to entice more customers and generate greater cash flow.

"You know, Australians or Westerners have a way of saying it's hard to teach an old dog new tricks, and I can only keep trying," he said.

"Whether I get there or not is another thing, but he will continue to run his business until he gets to the 50 years, which is his wish."

Stanley Yee declined to comment until Emperor's Garden restaurant reopens.

Plans to redevelop the site into a 16-storey mixed use complex have been paused "until when we believe the time is right", Valentine Yee said.

Mr Lai was also contacted for comment.

'Tumultuous' period for family

It has been a difficult time for the Yee family.

Valentine Yee was convicted for lying to the Independent Commission Against Corruption (ICAC) in August, with the Local Court hearing he had done so to protect his brother Jonathan, a former Labor figure.

Jonathan Yee is yet to enter a plea for charges relating to misleading ICAC and circumventing electoral donation laws. He is scheduled to appear in the Local Court in Sydney next month.

Their mother May Ho Yee is also yet to enter a plea on charges relating to misleading ICAC.

"I think in one word, [it's] definitely [been] tumultuous," Valentine Yee said.