If your company has a tax debt, the ATO can issue a garnishee notice to various parties to collect that debt. This includes banks or someone who owes your company money. A garnishee notice requires the recipient to pay funds held for your company or owed to your company, to the ATO.
Case study: Garnishee notices issued to debtors
We were appointed Liquidators of a large company operating in the building industry. The company owed several million to the ATO. Over time the company had entered into a number of payment arrangements with the ATO, but it had defaulted on them and its debt to the ATO had slowly increased. Prior to granting some of these payment arrangements the ATO had asked the company’s accountant to provide financial information for the company. This included lists of debtors of the company.
Ultimately, the ATO decided to take recovery action. It knew who the company’s major debtors were because it had been provided with debtor information from the company’s accountant. The ATO didn’t know how much debtors owed, but this was not important. The ATO issued garnishee notices to two debtors who it thought owed large amounts to the company. And the ATO was right as these debtors each owed over $600,000.
Once the garnishee notices were issued, the debtors had to pay the debts to the ATO. This crippled the company’s cashflow and it couldn’t pay rent and staff costs and ultimately went into liquidation very quickly.
Minimising the risks of garnishee notices
The best way to minimise the risk of getting a garnishee notice is to pay the tax your company owes in full. However, we understand that is easier said than done.
If you can’t pay your debt in full, it’s vital that you correspond with the ATO proactively and don’t put your head in the sand. If you’re able to work out a payment plan with the ATO and comply with its terms the ATO will not issue a garnishee notice.
How We Can Help
We offer a wide range of services including:
- Turnaround and restructuring which may include a sale of part of the business;
- Negotiating informal arrangements with creditors, including the ATO;
- Voluntary administration; and
- Small business restructuring.
Depending on the circumstances of your business, we can tailor our advice to your needs. This may include a combination of the above services we offer.
So, if you wish to explore all the options that may be available to your business, get in touch with us on 1300 906 966 or send us an email at firstname.lastname@example.org to arrange a free confidential initial discussion.