ATO Garnishee Notices Review

The review follows allegations aired by current and former ATO staff about the inappropriate use of the ATO’s powers to issue garnishee notices, particularly to small businesses, on a recent Four Corners Program.

Garnishee notices are the most common form of “stronger” action used by the ATO to recover tax debts from taxpayers who are unwilling to work with the ATO to address their debt, or repeatedly default on agreed payment plans. The notices are issued to third parties who are required to pay money, owed to the taxpayer, to the ATO to satisfy the taxpayer’s debt. The notices may require either a one-off payment or recurring payments for certain periods of time.

If you’re an individual, the ATO can issue garnishee notices to your employer, contractor, banks, financial institutions and building societies where you hold an account, and people who owe money to you from the sale of real estate (i.e. purchaser, real estate agent and solicitors). If you’re a business, the ATO may issue garnishee notices to financial institutions where your business holds an account, trade debtors, and suppliers of merchant card facilities.

According to the Inspector-General of Taxation: “Cash flow is the lifeblood of small businesses and, if inappropriately disrupted, can have an unjustified and devastating effect on them. My investigation will examine the accuracy of the allegations made along with themes emerging from complaints to my office with the aim of finding improvements where necessary and restoring confidence in the system”.

The review will draw on IGT complaints data, assess the relevant ATO systems including interviewing current and former ATO staff in debt recovery units across multiple locations, and seek to understand and assess the nature of any impact on affected taxpayers.

The terms of reference of the review include:

• understanding ATO’s strategies to manage tax debts by way of garnishee notices;
• policies and procedures for issuing garnishee notices, including the circumstances the ATO considers in cases of vulnerable small businesses and individuals;
• current mechanisms to ensure ATO staff adhere to the ATO’s garnishee notice policies and procedures;
• key performance indicators for both tax debt collection and staff performance;
• specific communications to ATO staff regarding the use of garnishee notices and associated KPIs at each location of its debt recovery units; and
• other relevant concerns or potential improvements identified during the course of the review.