A Garnishee Notice entitles the Australian Tax Office (“ATO”) to collect an outstanding tax debt by directly removing monies from an insolvent company’s bank account or directly collecting monies from a company’s debtors.
A tax garnishee notice has the effect of making the ATO a secured creditor over the debts or monies due to the insolvent company. The garnishee notice creates a statutory charge which ranks as a fixed charge and in priority to any previously created floating charges which have not crystallised prior to service of the garnishee notice.
In a nutshell, the ATO achieves priority over certain existing secured creditors and priority over unsecured creditors for payment of what is, in effect, an unsecured debt.
It is important to act immediately to establish both the validity of the Garnishee Notice and compliance with the policy considerations and limitations outlined in the ATO’s Receivables Policy. The Commissioner’s power to issue a Notice under sections 260-265 is an administrative discretion and there may be circumstances which may cause the Commissioner to review his decision.
Proactive action is necessary as, in practise, the service of a garnishee notice may have an extremely detrimental impact on the cash flow of a business.
If Liquidation is the right solution for your company then you’ll be pleased to know it is a simple process. We will usually recommend a Creditors Voluntary Liquidation, or “CVL”, which is quick, simple and inexpensive.
If the above advice has not answered your questions you might want to review the following pages and downloadable Information Sheets:
Or please call us for free advice.
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Partner of a Sydney Accounting Firm
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Director of a Property Development Company
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