The ability to issue a Garnishee Notice to a tax payer’s bank or employer is just one of the many powers available to the ATO to try and recover debts owed. A Garnishee Notice will ordinarily be issued to a tax payer’s bank for the payment of all (or a set percentage) of funds held in any bank accounts by the tax payer. A Garnishee Notice may also be issued to the tax payer’s employer to pay a certain amount to the ATO each pay period out of the tax payer’s wages. Of course neither of these things is especially welcome.
Perhaps the most important thing to note is that if a Garnishee Notice is issued to a tax payer prior to bankruptcy the ATO will usually NOT withdraw the Notice and it will continue to be effective during the 3 years of bankruptcy.
It’s not all doom and gloom however as there are ways to avoid garnishees being issued or if they are issued, of attempting to minimise their damage.
How to avoid ATO Garnishee Notices being issued
Pay your ATO Debt on time and in full.
Yes, yes easier said than done. We understand that sometimes it’s simply impossible to pay your ATO debt on time. However with a little pre-planning it’s possible to hold enough cash aside to pay your ATO debt when it does fall due. If running a business you should be forecasting every 6 months so you know in advance what needs to be held aside to pay your ATO debt when it falls due. If you can’t pay in full, you should at least be able to put forward a payment plan proposal to the ATO.
Negotiate a payment plan with the ATO
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 it’s terms the ATO will not issue your bank or employer with a garnishee notice.
Don’t keep all your bank accounts with one bank
The ATO will usually (at the very least) issue a Garnishee Notice to any known bank accounts of you or your business – think about what accounts are disclosed in your income tax returns. These will be the first accounts to be targeted.
While this may not be your ideal outcome, filing for bankruptcy prior to any Garnishee Notices being filed will prevent any being issued because the ATO will not issue one once you are bankrupt. Bankruptcy will also give you the ability to clear away any other debts you have and start afresh. For further information on bankruptcy see here.
What if you’ve already received a Garnishee Notice?
Quit your job
Your Garnishee Notice won’t follow you, it remains with your employer that it was issued to. You can therefore considering changing jobs. However this will usually be a temporary fix given that the ATO can find out your new employer and issue a Garnishee Notice to them. It would however give you the ability to file for bankruptcy without the Garnishee Notice remaining in place during the bankruptcy.
Make submissions to the ATO
You can make a submission to the ATO and ask it to reduce the amount it takes each pay period. Taking various factors into account, it will then decide whether to reduce the amount being claimed.
As with all debt problems it’s vital that you act early to give yourself options and time to try and work something out.
For further assistance get in touch on 1300 4 CACTUS or chat to us via the live chat window on our site.