ATO garnishee notices: what you need to know
The effects of a garnishee notice can feel devastating for your business. We understand the weight of responsibilities you carry as a business owner and the stress this situation brings.
At AVA Advisory, we combine expert guidance with genuine understanding to help you navigate through this challenge. Let’s start by helping you understand garnishee notices and explore your options for moving forward.
What to do if you’ve received a garnishee notice
When the Australian Taxation Office (ATO) issues a garnishee notice to recover unpaid tax debts, swift action can make all the difference. While this situation feels overwhelming, remember that you’re not alone.
The most crucial first step is seeking professional advice. Our corporate insolvency specialists bring both expertise and understanding to help you:
- Assess your financial position with clarity and insight
- Identify practical restructuring options tailored to your situation
- Open productive negotiations with the ATO
- Create sustainable payment arrangements that work for your business
With early intervention, we can help you navigate this challenge and work towards protecting your business’s future. Our team brings decades of combined experience in debt management solutions for Small to Medium Businesses. We know the path forward and we’ll guide you every step of the way.
How AVA Advisory can help
At AVA Advisory, we understand the stress of receiving a garnishee notice. Our experienced team provides clear guidance and practical solutions to help protect your assets and achieve the best possible outcome.
Immediate action and ATO negotiation
Time matters when dealing with a garnishee notice. We’ll represent your interests with the ATO, working to negotiate manageable payment arrangements or potentially secure a temporary stay on the notice.
Comprehensive financial assessment
Our team will conduct a thorough business ‘health check’ to understand your tax debt obligations. This crucial step helps us create strategies that not only address the immediate crisis but also prevent future tax pressures.
Long-term financial planning
We’ll work with you to develop a strategic financial plan focused on: Optimised cashflow Ensuring future tax compliance Building stronger financial resilience Depending on your situation, we might recommend Small Business Restructuring or Voluntary Administration to support this process.
Protecting your personal assets
With garnishee notices often signalling serious financial challenges, we’ll guide you through personal asset protection strategies. This helps shield you from potential liability as a director.
Why is the ATO issuing more garnishee notices?
During the pandemic, the ATO temporarily paused its debt recovery processes. However, the ATO has resumed active debt collection. This shift means more Australian businesses face garnishee notices as the ATO works to recover unpaid taxes.
For business owners like you, this changing landscape requires quick action when a garnishee notice is issued. At AVA Advisory, we’ve helped countless businesses navigate these challenges. Our expert team knows how to help you explore options and find the best path forward for your specific circumstances.
is owed to the ATO by businesses
of what’s owed to the ATO is attributed to small businesses
Why is the ATO issuing more garnishee notices?
During the pandemic, the ATO temporarily paused its debt recovery processes. However, the ATO has resumed active debt collection. This shift means more Australian businesses face garnishee notices as the ATO works to recover unpaid taxes.
For business owners like you, this changing landscape requires quick action when a garnishee notice is issued. At AVA Advisory, we’ve helped countless businesses navigate these challenges. Our expert team knows how to help you explore options and find the best path forward for your specific circumstances.
is owed to the ATO by businesses
of what’s owed to the ATO is attributed to small businesses
What is a garnishee notice?
A garnishee notice is a formal notice from the ATO that redirects your business funds to pay tax debts. The ATO can send these notices to:
- your banks and financial institutions
- your trade debtors
- your merchant facility providers
- professional service providers holding funds in trust
These notices specify either an amount to be deducted or a percentage of each payment. The impact on your business’s cashflow can be significant, which is why early expert guidance is crucial.
What is a Director Penalty Notice (DPN)?
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
Pay As You Go (PAYG) Withholding
Superannuation Guarantee Charge (SGC)
Goods and Services Tax (GST)
The DPN outlines the unpaid debt and actions required to avoid personal liability.
Types of DPNs: Which have you received?
The ATO issues two types of DPNs, each with specific implications:
21-day DPN (Traditional or Non-lockdown DPN)
Issued when tax debts are overdue but have been reported to the ATO within three months of the due date.
Directors have 21 days to act, with options such as:
Paying the debt in full.
Placing the company into liquidation or Voluntary Administration (VA).
Appointing a Small Business Restructuring Practitioner (SBRP), if total debts are under $1 million.
Directors have 21 days to act, with options such as:
Lockdown DPN
Issued when tax debts remain unreported or unpaid for over three months past the due date.
Directors are immediately personally liable for the debt, with no option to appoint administrators or liquidators to avoid liability.
Key Difference
A 21-day DPN provides time to act, while a Lockdown DPN imposes immediate personal liability.
Types of garnishee notices: which are you the subject of?
The ATO issues two types of garnishee notices, each affecting your business differently:
Point in time notices
Also known as “one-off” notices, these require a single payment from the third party. They typically demand the lesser of:
- the full tax debt, or
- a specified percentage of the available funds (up to 100%).
Continuing notices
These “ongoing” notices require continuous payments from the third party. They apply to both current and future funds up to a specified amount, usually covering the full tax debt.
Key differences
Point in time notices target funds available right now, then expire immediately after execution. Continuing notices remain active and affect both current and future funds for a specified period.
Understanding which type of notice affects your business helps determine your best course of action. Our team can help you assess the impact and develop an effective response strategy.
What should you do after receiving a garnishee notice?
Receiving a garnishee notice can feel overwhelming but prompt action can help protect your business. Here’s how to take control of the situation:
Step 01
Cashflow analysis
Complete an urgent review of your cash position. This helps you identify available funding sources and prioritise essential payments to keep your business running.
Step 02
Strategic ATO engagement
Armed with your cashflow analysis, contact the ATO immediately. We can help you present a realistic payment plan. If this proves unsuccessful, we’ll explore formal debt restructuring options with you.
Step 03
Operational restructure and stakeholder management
Review your business finances to find potential cost savings. We can help you explore structured solutions like Small Business Restructuring or Voluntary Administration if needed.
Review your business finances to find potential cost savings. We can help you explore structured solutions like Small Business Restructuring or Voluntary Administration if needed.
Why ignoring a garnishee notice isn’t an option
A garnishee notice demands immediate attention for several crucial reasons:
Immediate financial impact
The notice takes effect right away. This can instantly restrict your business’s access to cash, as the third party must comply with the garnishee notice.
Legal consequences
Third parties who don’t comply can face criminal charges. The ATO may also take further recovery action against your business.
Threat to business survival
Without access to funds, you might struggle to:
- meet daily operational costs
- pay employees
- purchase inventory
- service other debts
Damage to key relationships
The garnishee notice can strain relationships with affected third parties, potentially leading to:
- lost business opportunities
- damaged supplier relationships
- contract terminations
As a former director, can you be affected by a wind-up notice?
Even after stepping down as a director, you’re not automatically free from garnishee notice implications. The ATO can still hold you responsible for:
- PAYG withholding
- Superannuation Guarantee Charge
- Net GST liabilities
These responsibilities cover reporting periods that begun during your directorship.
If you learn of a garnishee notice affecting a company where you were previously a director, seek immediate advice to understand your position.
How AVA Advisory can help
At AVA Advisory, we understand the stress of receiving a garnishee notice. Our experienced team provides clear guidance and practical solutions to help protect your assets and achieve the best possible outcome.
Immediate action and ATO negotiation
Time matters when dealing with a garnishee notice. We’ll represent your interests with the ATO, working to negotiate manageable payment arrangements or potentially secure a temporary stay on the notice.
Comprehensive financial assessment
Our team will conduct a thorough business ‘health check’ to understand your tax debt obligations. This crucial step helps us create strategies that not only address the immediate crisis but also prevent future tax pressures.
Long-term financial planning
We’ll work with you to develop a strategic financial plan focused on: Optimised cashflow Ensuring future tax compliance Building stronger financial resilience Depending on your situation, we might recommend Small Business Restructuring or Voluntary Administration to support this process.
Protecting your personal assets
With garnishee notices often signalling serious financial challenges, we’ll guide you through personal asset protection strategies. This helps shield you from potential liability as a director.
FAQs
Find answers to common questions about garnishee notices.
The ATO can claim the entire amount of your overdue tax debt. For ongoing payments like trade debts, they typically take a percentage. Our team can help you understand exactly what this means for your business’s cashflow.
The ATO must send you a copy of the garnishee notice. However, by the time you receive it, the notice may already be affecting your accounts. This is why maintaining open communication with the ATO is crucial.
Act quickly. There’s often an opportunity to negotiate a payment plan and potentially have the garnishee notice withdrawn. However, timing is critical. The sooner you seek expert help, the more options you’ll have.
The ATO typically issues these notices when businesses:
- have unpaid tax obligations
- have defaulted on agreed payment plans
- show an unwillingness to resolve tax disputes
- are suspected of illegal phoenix activities
- may be deliberately avoiding tax obligations.
While it’s possible to challenge a garnishee notice, success is rare without expert help. The most effective approach is usually negotiation with the ATO to establish a payment plan. Our team can guide you through this process.
We provide crucial support when you’re facing this financial challenge. Our team can:
- represent you in ATO communications
- negotiate practical payment arrangements
- help develop strategies to strengthen your cashflow
- guide you through restructuring options, if needed
Still have questions?
Get in touch for more information.
Join us on the journey to resilience
At AVA Advisory, we believe that every business deserves the chance to not just survive but thrive. Our team is here to provide the expert guidance, personalised solutions, and empathetic support you need to overcome financial challenges and achieve long-term success. Whether you’re facing insolvency, struggling with debt, or looking for ways to improve your financial management, we’re here to help.
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Reach out to our friendly team for an obligation-free, cost-free consultation. Share details of your situation and concerns in confidence. Clarity, relief, and a brighter future for you and your business are only a few steps away.
