ATO Garnishee Notices: What You Need to Know
When a business or individual falls behind on their tax obligations, the Australian Taxation Office (ATO) has a range of enforcement tools at its disposal. One of the most powerful and immediate of these is the Garnishee Notice. If you've received one—or are at risk—it’s essential to understand what it is, how it works, and what steps you can take to protect yourself or your business.
What Is a Garnishee Notice?
A Garnishee Notice is a legal tool the ATO uses to recover unpaid tax debts directly from a third party that owes money to the debtor or holds funds on their behalf. This includes banks, employers, contractors, and customers.
In simple terms, the ATO can legally redirect money owed to you or your business straight into their account to repay your tax debt—without needing a court order.
Who Can the ATO Send a Garnishee Notice To?
The ATO can issue garnishee notices to:
Banks and financial institutions
Employers (for individual taxpayers)
Customers or clients (who owe you money)
Real estate agents managing rental income
Solicitors (holding funds in trust)
Other parties holding or managing funds on your behalf
How Much Can the ATO Garnishee?
It depends on the type of notice and the recipient. For example:
Bank accounts: The ATO may request a lump sum amount or a percentage of future deposits.
Employers or customers: The ATO might ask for a percentage of ongoing payments, usually around 30% to 50%.
The ATO typically doesn’t freeze the entire bank account, but they may collect all available funds up to the debt amount.
Do They Have to Warn You First?
While the ATO may attempt to contact you beforehand, they are not legally required to warn you before issuing a Garnishee Notice.
However, they often send reminder letters or final notices before escalating to garnishment, especially in the case of businesses.
When Is a Garnishee Notice Most Likely?
You’ve ignored payment plans or failed to meet agreed instalments.
Your business has accumulated significant ATO debt (often over $50,000–$100,000).
You’ve received a Director Penalty Notice or final notice to pay.
You’ve not responded to multiple ATO attempts to engage.
Can You Stop or Reverse a Garnishee Notice?
Yes—but time is critical.
Here’s how you can respond:
1. Contact the ATO Immediately
They may pause action if you're actively working toward a resolution.
2. Propose a Payment Plan
You may be able to renegotiate terms and have the garnishee withdrawn.
3. Seek Professional Help
Engage a tax advisor, insolvency expert, or Small Business Restructuring Practitioner to represent you and potentially negotiate a formal restructuring plan.
4. Apply for a Small Business Restructure (SBR)
If you’re eligible, an SBR can freeze enforcement action and offer debt reductions up to 70%.
How Does a Garnishee Notice Affect You?
Immediate loss of cash flow – can cripple your operations
Damaged relationships with suppliers and clients (if they’re garnisheed)
Bank overdraft issues
Potential credit rating impact
Increased stress on directors and business owners
How to Prevent Garnishee Action
Lodge BAS and tax returns on time – even if you can’t pay.
Engage early with the ATO if you’re struggling.
Use qualified professionals to negotiate or propose a restructuring plan.
Don’t ignore reminder letters or payment default notices.
References
Australian Taxation Office: Garnishee Notice Explained
Taxation Administration Act 1953 – Sections 260-5 to 260-10
ARITA: Dealing with Tax Debt
