Garnishee Order - Would You Like Someone Else Taking Money Out of Your Bank Account

Tax Office Muscle

The Australian Taxation Office (ATO) has the power with a Garnishee Order, to take money from your bank account without your consent or knowledge.  Even if you do know it's going to happen, short of declaring bankruptcy, you can do very little to stop it.

When does it happen?

A Garnishee Order will usually occur when there is an outstanding debt.  However it has also been known to happen in cases of overdue lodgements of tax returns or BAS's.

Are there rules that the ATO must abide by?

The Australian Taxation Office must first issue a notice of their intentions.  This gives you 21 days to take some action , but we had an instance when they acted in just 9 days - they are breaking their own rules.

Why is it happening?

The ATO have stepped up their efforts in collecting money owing to them.  They can issue a Garnishee Order to the bank.  This is a court order supported by Federal Tax Law.  The bank must obey a lawful order of the court, otherwise it would have large fines for contempt of court.

Example (this is what happened to one of our clients):

The BAS was lodged early and an amount due was $35,000.  The client didn't have to pay for another three weeks, went on holidays and forgot to pay.  The ATO issued a notice to the business that they would use a Garnishee Order.  The notice went to a wrong address, and business client never saw it.  "Too bad", said the ATO, "not our problem".  Within 8 days, the client paid the bill.  On the 9th day the ATO took the cash out of the bank - so it had been paid twice.  No amount of debate (argument) with the ATO would change matters.  Getting the overpayment back from the ATO took a further month.

This type of belligerent action is becoming more common.  If you ever see a letter from the ATO with the word Garnishee on it, take immediate action - call our experienced accounting team here at Smith Thornton Accountants.