You may have received an Australian Taxation Office (ATO) Garnishee Notice recently. If you received a shock, you’re not alone. If you haven’t received one, but you owe the ATO an outstanding debt which is not on an approved payment arrangement, you need to take note.
The ATO has increasingly used Garnishee Notices to recover money where it is owed an outstanding debt by a business or person. We have assisted a number of companies and individuals who have been the subject of one or more Garnishee Notices issued by the ATO in respect of outstanding tax liabilities including GST, PAYG, superannuation guarantee charge and income tax.
The ATO can issue a Garnishee Notice to someone that holds money on behalf of a company or individual or who may owe a debt to them. Commonly Garnishee Notices are issued to banks (who hold money on behalf of a company or individual), debtors (who owe money to a company or individual) or an individual’s employer.
A Garnishee Notice requires the recipient to pay funds to the ATO in lieu of a company’s or individual’s taxation debts. For example the ATO may issue a Garnishee Notice to a company’s bank, requiring the bank to pay 75% of all funds held in the company’s bank accounts to the ATO up to the amount of the company’s taxation liability.
A Garnishee Notice issued in respect of a trading company can have significant adverse effects on that company’s future funds available to pay wages and entitlements payable to employees or its outstanding trade creditors and other debts. The result can be immediate closure of the business and subsequent liquidation.
Given the serious impact of a Garnishee Notice, it is important for companies which fall behind in payment of their tax obligations to proactively engage with the ATO. If discussions are not commenced with the ATO regarding payment of the tax debts, the ATO is more likely to take recovery action including by issuing a Garnishee Notice, or alternatively a director penalty notice or a statutory demand to commence winding up proceedings.
For individuals who are employees, it is especially important to note that if a garnishee notice is issued to your employer, the notice will often not be withdrawn if you go bankrupt. This means your employer will be required to keep paying amounts to the ATO from your salary until you’re released from your debts at the end of three years of bankruptcy.
Advice Regarding ATO Garnishee Notices
If you or your accountant are not able to negotiate a payment arrangement, we can help. We are experienced at negotiating with the ATO in difficult circumstances. Don’t wait and risk having your bank account cleaned out by an ATO Garnishee Notice, speak to the ATO, your accountant or contact us today.