How to Stop a Garnishee Order
A Garnishee Order may be issued by the Australian Taxation Office (‘ATO’) when a taxpayer fails to pay outstanding tax debts. The ATO can require a third party holding a taxpayer’s funds, or a third party owing amounts to a taxpayer, to pay part of such amounts to the ATO. Third parties can include:
- a taxpayer’s employer;
- banks or financial institutions;
- businesses or individuals that owe a taxpayer money (for example, trade debtors);
- merchant card providers who process a taxpayer’s customer payments; and
- solicitors, real estate agents, or purchasers involved in the sale of real property that a taxpayer owns.
Once issued, the Garnishee Notice takes effect immediately, and the third party must comply or face penalties.
Although the process allows the ATO to recover debts directly from the third party, the taxpayer will usually receive a copy of the notice after it has been issued.
In Australia, the ATO generally limits Garnishee Notices to a maximum of 30% of an employee’s gross wage. However, it may garnish an employee of greater amounts depending on their income level and family circumstances.
Under certain circumstances, a Garnishee Notice can be contested or negotiated.
Pay the Debt in Full
The quickest and easiest way to stop the Garnishee Notice is to pay the debt in full. Once the debt is paid, the ATO will generally withdraw the Garnishee Notice.
Communicate With the ATO
Taxpayers should promptly contact the ATO upon receiving a Garnishee Notice. During this communication, a taxpayer ought to confirm the debt amount and explore payment plan options, as the ATO offers arrangements to repay the debt in manageable instalments.
The ATO may withdraw or reduce the Garnishee Notice if a taxpayer negotiates a suitable payment arrangement at an early stage after receiving the notice.
Financial Hardship
A taxpayer may raise financial hardship with the ATO if the Garnishee Notice prevents the taxpayer from meeting basic living expenses or causes genuine hardship. This avenue may allow the Garnishee Notice to be reduced or suspended. The taxpayer will need to provide detailed financial statements and evidence of the taxpayer’s circumstances.
Contesting a Garnishee Order
In some circumstances, a taxpayer may wish to challenge a Garnishee Notice if the taxpayer believes the underlying tax debt is incorrect. The taxpayer should quickly lodge a formal objection requesting administrative review of the underlying tax assessment, or apply to the Courts for relief. If the ATO has assessed the taxpayer’s liability incorrectly, the taxpayer can dispute both the debt and the Garnishee Notice.
Contact Us
Taxpayers ought to seek legal advice after becoming aware of the existence of a Garnishee Notice. Tax professionals can offer advice in relation to a taxpayer’s situation, formulate a personalised strategy, and advocate on the taxpayer’s behalf to reach a favourable outcome.
For more information, contact Bambrick Legal today. We offer a free, no-obligation 30-min consultation for all enquiries.
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Related Blog – Understanding ATO Remission of Penalties