Garnishee Notices: Is the ATO Really Out to Get Small Businesses?


One of the more severe methods applied by the Australian Tax Office (ATO), a garnishee notice, is a tool that allows the ATO to seize money directly from a person or business that holds money on behalf of a taxpayer.

This could be your employer, bank, or other financial institution, and even those who owe money to you through the sale of real estate.

Complaints about garnishee notices rose throughout 2017 and 2018, prompting an investigation by the Inspector-General of Taxation (IGT).

The report, released in 2019, found no evidence of ‘cash-grab’ tactics by the ATO.

The report also rejected allegations that the ATO promoted revenue-raising targets and that staff performance was rated based on amounts collected via garnishee notices.

However, the ATO did note that there were some issues with staff communications and training which could lead to errors in the process of issuing a notice.

Garnishee notices are typically a last resort and the ATO should only issue them with proper due process.

However, the Australian Small Business and Family Enterprise Ombudsman is still concerned about the number of ATO garnishees, noting the potential for significant harm to be caused to a small business if a notice is issued inappropriately.

As the report itself noted, a notice issued improperly can have a ‘devastating impact on small business and vulnerable individuals’ and leave them in severe financial distress.

The report states that ‘…a garnishee notice can disrupt cash flow, cause a creditor to withdraw their credit, have a reputational impact, and contribute to emotional distress.

The timeframe in which such impacts may be mitigated is short, particularly with the implementation of the National Payments Platform which provides for almost instantaneous payment transfers.’

Many small businesses, especially new ones, operate on fairly thin margins for cash flow and profit.

A notice issued in such a situation has a significant chance of ruining a business, especially if they are unable to pay staff or suppliers.


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Related Blog – Tax Update: Budget 2021

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