A garnishee notice is an order the Australian Taxation Office issues to a third party of a tax debtor that may hold funds on their behalf. What a garnishee notice is, in simple terms, is the ATO seeking money from someone that has your money for you to pay off tax debts if you fail to do so yourself. Garnishee notices essentially allow the ATO to take money from a range of different sources on a one-off or ongoing notice.

The tax debts that apply in these circumstances include personal, and business debts and are generally the next step in debt recovery if you fail to pay what is owed. Garnishee notices may be issued to employers, your bank, insurers, people who owe you money for real estate sales, or companies in which you hold dividend returning shares. For businesses, notices may also apply to clients, suppliers, or trade debtors.

Simply put, yes. When a garnishee notice is ordered against your bank account, your bank will be legally required to pay what is in your account to cover the cost of tax debts. This requirement has been the case since the introduction of section 260-5 of schedule 1 of the Taxation Administration Act 1953. Because the ATO has this power, you must act before a garnishee notice is sent to your bank, at which point money can be removed from you.

Before this final action, you will receive a red warning letter from the ATO as the last warning. If you ignore this letter, the ATO will continue to an ATO garnishee bank account notice. However, if you decide to resolve the problem, you can avoid money being removed from your account altogether. For advice on preventing garnishee notices, speak to our tax professionals today.

• The implications on the tax debtor’s ability to provide for their family or their future business viability
• The circumstances and financial position of the tax debtor in relation to how they have tried to pay the debt as quickly as possible
• Whether other creditors will not be paid due to the funds being at risk of removal by the ATO
• Any and all other debts owed by the tax debtor

When you receive a written garnishee notice from the Australian Tax Office, this will have been issued at the same time as the notice provided to the third parties involved in the recovery of funds. Third parties are required to pay the amount specified within the garnishee notice. The tax debt is cleared if the total amount of funds is taken. If the full amount is not available, an ongoing notice may be used to claim the money over time.

As a tax debtor, you can contact the ATO directly to defend the notice technically, or you may choose to negotiate a payment plan. Most ATO payment plans last between 3 months and 2 years, and some upfront payment may be required. If you decide to challenge the notice, you may wish to seek help from a legal professional or tax specialist to defend your choice not to pay a tax debt.

A garnishee order provides an efficient method for collecting outstanding debts from debtors

Instead of continuously chasing debtors for payment, funds are deducted directly from their income or bank account, simplifying the collection process. This approach is cost-effective for creditors, eliminating the need for lengthy legal proceedings or hiring debt collection agencies.

Additionally, garnishee orders prioritise the debt owed to the creditor over other expenses, increasing the likelihood of debt recovery.

Finally, garnishee orders are legally enforced by the relevant court, providing a well-structured and supervised process that encourages debtors to comply with their financial obligations to avoid legal consequences.

To enforce a garnishee notice, a creditor first must obtain said notice issued by the relevant court.

This notice is then served on the third party holding the debtor’s funds, such as an employer or bank. The third party is legally obligated to comply with the order and deduct the specified amount from the debtor’s income or account.

The deducted funds are then transferred directly to the creditor. Failure to comply with the garnishee notice can result in legal consequences for the third party.

A garnishee order, also known as a writ of execution, is a legal document issued by a court (local Magistrate, District, or Supreme) that allows a creditor to collect a debt owed by a debtor. It instructs a third party, such as an employer or bank, to withhold and transfer funds from the debtor directly to the creditor to satisfy the debt.

If the Australian Taxation Office (ATO) issues a garnishee notice, they will usually provide a specific debt payment timeframe. The duration can vary depending on the circumstances.

For most tax debts, the ATO requires you to accept a payment plan to settle the owed amount through direct debit over 12 months.

If you receive a statutory demand notice from the ATO, you must pay the entire debt or make a payment plan with the ATO within 21 days.

In certain situations, such as if you are facing financial hardship, the ATO may grant extensions or provide alternative payment options.