ATO Garnishee Notices: How Advisors Can Step In Before a Client Loses Their Biggest Customer

ATO garnishee notices are landing faster and more often than they did a few years ago, and by the time a client mentions one to their accountant, money has usually already moved. A garnishee notice lets the ATO recover a tax debt by going around the business entirely, directing a third party who holds the client’s money to pay the ATO first. There is no court process, and often no second warning.

The scale of garnishee activity has climbed sharply as the ATO returns to firmer, faster enforcement:

• Fewer than 1,000 garnishee notices were issued in 2021-22, while pandemic-era leniency held
• That rose to 2,924 in 2022-23, then 6,150 in 2023-24
• More than 15,000 were issued in 2024-25, more than doubling year on year

Garnishee notices are now being issued earlier, and against a wider range of targets, than most clients expect.

A garnishee notice is issued under Section 260-5 of Schedule 1 to the Taxation Administration Act 1953. It directs a third party who holds money for the client, or who owes the client money, to pay that money to the ATO instead. The third party can be a bank, a trade debtor, a customer, an employer, or the holder of a trust account. The ATO does not need a court order, and the recipient of the notice is legally obliged to comply.

A garnishee is not limited to a client’s bank account. The ATO can direct almost anyone who holds the client’s money, or who owes it to them, to pay the ATO first. Four targets come up most often, and each carries a different level of damage.

• Bank accounts. The ATO instructs the client’s bank to hand over the available balance. This is often the first sign the client has that firmer action has begun.
• Wages or salary. Where a director or individual draws a wage, the ATO can garnishee the employer. It generally leaves the person a protected minimum and takes the rest until the debt is cleared.
• Trade debtors. Customers who owe the business are told to pay the ATO instead of the client. Beyond the lost cash, it exposes the client’s tax position to their own market.
• EFTPOS and merchant card facilities. This is the newer and often most damaging target. The ATO can garnishee the provider that processes the client’s card takings, so a share of every day’s EFTPOS and credit card receipts is redirected before it reaches the business. For a retail or hospitality client that runs on card sales, working capital can be drained day after day, with no single large withdrawal to trace.

These questions are more productive before a liquidator is appointed than after.

There are two forms:

The most damaging garnishees are not the ones served on the bank. They are the ones served on a client’s customers. When the ATO issues a notice to a debtor of the business, that customer is instructed to pay the ATO rather than your client. It exposes the tax position to the client’s own market, and it can end commercial relationships that took years to build.
Consider an engineering business that owed the ATO around $300,000 and held off dealing with it, hoping trading conditions would turn. The first garnishee hit a bank account that was already overdrawn, so the client redirected receipts to a new account. The ATO then garnisheed the client’s largest customer directly. The relationship did not survive, major contracts were lost, and what could have been a business restructure ended in personal bankruptcy. de Jonge Read® was engaged too late to keep the customer in place.

• Ageing ATO integrated client account balances with no payment arrangement in place
• Lodgements up to date but liabilities unpaid, which keeps the debt squarely on the ATO’s radar
• A client moving banking around, or asking customers to pay into different accounts
• Ignored ATO letters, SMS reminders, or a payment plan that has lapsed

Any one of these means the client is closer to firmer action than they realise.

Acting Before the Notice Arrives

Once a garnishee is issued, the money is gone and the options narrow to damage control. Before that point, there is room to move. de Jonge Read® develops the strategy for dealing with the ATO debt, project manages the negotiation and the paperwork, and where a formal restructure is the right path, engages the appropriate practitioner on the client’s behalf. The goal is to resolve the liability before the ATO reaches the client’s bank, or worse, their customers.