The number of ATO garnishee debt-recovery notices released each day, as reported in the acting Inspector-General of Taxation and Taxation Ombudsman’s (IGTO) review, is of great concern to the Australian Small Business and Family Enterprise Ombudsman, it said in a statement.
“When a garnishee is issued on a small business, funds are removed from the business’ bank account,” Ombudsman Kate Carnell said.
“This means the business may not be able to pay staff and suppliers and will probably cease to trade.”
The inappropriate use of garnishee notices can severely affect a small business’ cash flow, the IGTO review found.
“Given the draconian nature of the notices and the lack of judicial or other external oversight of notices before release, they should be used only as a last resort … if at all,” Ms Carnell added.
“We are pleased the IGTO did not uncover a concerted ATO ‘cash grab’ on small businesses or a link between debt staff personal performance and placement of garnishee orders.”
The Ombudsman applauded the ATO’s agreement to the IGTO recommendations, judging that they will help improve existing systems to anticipate problems rather than responding to problems as they become known.
Ms Carnell reiterated that her office continues to research historical cases of early debt recovery by the ATO, which will include the consideration of garnishee orders.
Garnishee powers applied ‘appropriately and infrequently’
The IGTO review concluded that there was no evidence that ATO’s management had given directions to staff to issue standard garnishee notices as a cash-grab, commissioner Chris Jordan said late last week.
“It found that it is ‘very clear’ that staff issuing garnishee notices applied due process in a manner that had regard for the taxpayer, and acted entirely within the objectives of the overall ATO administrative policy in issuing garnishee notices,” Mr Jordan said.
He added that “our staff use garnishee powers appropriately and infrequently” – only when other debt collection activities have been unsuccessful, and the taxpayer has not engaged with the ATO to find a resolution.
According to the IGTO report, during the 2016-17 financial year, the ATO issued 23,712 garnishee notices, equal to some 8 per cent of total debt collection cases.
