You may have experienced the pressure of not being able to keep up with your tax debts, especially during the current period of economic uncertainty. If you are in this situation you are probably also wondering what can the ATO do to recover the tax debt they are owed.
This is the first part of a 3-part series where we look at the steps the ATO can take if you don’t pay your tax debts. In this article, we look at ATO Garnishee Notices.
Generally, before the ATO takes any serious action against you or your business, they will contact you or your accountant. And this is when you should engage with the ATO and negotiate a payment arrangement. Because if you don’t, the ATO will take recovery action against you or your business. One of the types of recovery action the ATO can take, being issuing a Garnishee Notice.
What is a Garnishee Notice?
A Garnishee Notice is a notice issued by the ATO. It is issued to a third party that holds your money, or has an obligation to pay you, whether currently or in the future. The notice directs these third parties to:
- Surrender your money within their possession to the ATO; and/or
- Surrender any future money that will come into their possession; and/or
- Surrender all money as and when it is due to be paid to you.
There are two types of Garnishee Notices that can be issued by the ATO;
- Notices requiring any entity, including banks, to pay a one-off amount to the ATO from the money the entity holds on your behalf, up to the amount of your tax debt; and
- Notices requiring any entity, including banks, to pay to the ATO any amount held on your behalf, and any future amount they receive up to the amount of your tax debt.
Who Can the ATO Issue a Garnishee Notice to?
Garnishee Notices are commonly issued to:
- Banks who hold money on behalf of your company, requiring the bank to surrender a percentage or all of the funds held in your company’s bank accounts to the ATO, up to the amount of the tax debt;
- Debtors who owe money to your company, requiring them to pay debts owed to your company to the ATO instead;
- Parties who have entered into a sale and purchase agreement for real property, requiring them to pay the purchase price to the ATO. This is particularly relevant to property development companies; and
- Your company’s solicitors who may hold funds on trust on behalf of your company requiring them to pay funds held to the ATO.
In addition to directing your bank(s) to surrender a portion or all of the funds held in your bank account(s) to the ATO, your employer(s) may also be directed by the ATO to deduct a percentage of your gross wages each time they are payable and forward them to the ATO.
What Can You Do to Avoid Getting a Garnishee Notice?
If you have tax debts that have been outstanding for some time, don’t wait until you have received a Garnishee Notice. Give us a call and we will be able to you help you implement the kind of solutions we have previously written about here.
If you have received a Garnishee Notice from the ATO, you should urgently contact us for a free no obligation consultation so we can help you.