Garnishee notices: Is the ATO really out to get small businesses?
One of the more severe methods applied by the Australian Tax Office, 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 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 was released on 13 March 2019, and 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 reputational impact and contribute to emotional distress. The timeframe in which such impacts may be mitigated are 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.
If you have an issue with tax or debt collection, contact Bambrick Legal now for a without cost 20‑minute no obligation consultation. Adrian Bambrick is a tax professional with many years of experience working both with and against the ATO. We can help you tackle a tax problem head on before it becomes too big to handle.