Can the ATO take money out of your bank account?

Yes. A garnishee notice under section 260-5 of Schedule 1 to the Taxation Administration Act 1953 directs a third party who holds or owes you money — a bank, an employer, a trade debtor, a merchant card provider, a solicitor holding sale proceeds — to pay the Australian Taxation Office instead of you. No court order is required. The ATO says it sends a warning letter first and serves you a copy of the notice.

What the notice is, and who receives it

A garnishee notice is not sent to you. It is sent to somebody who holds your money or owes you money, and it tells them to pay the Australian Taxation Office instead. The power is in section 260-5 of Schedule 1 to the Taxation Administration Act 1953, and it is exercised by a written notice from the Commissioner — no judgment, no court, no hearing. The third party is required to comply, and is indemnified for whatever it pays across.

The ATO's published list of who can receive one is wider than most people expect: banks and other financial institutions holding your accounts; employers who pay your wages or salary; businesses or individuals who owe you money, such as trade debtors; merchant card providers who process your customer payments; and solicitors, real estate agents or purchasers involved in the sale of a property you own.

That last category is why this is not only a bank-account problem. The money a business is counting on to trade its way out — the debtors' ledger, the card takings, the proceeds of the sale that was going to fix everything — can all be reached by the same one-page notice.

You are not the first one this week

The first call is almost always to the bank, and the bank is the one institution that cannot help here. It has just been told to hand over the balance; it is not about to lend against the same account. Nor will the next bank, and usually not for any reason connected to whether the loan would be repaid — the last financials look wrong, a lodgement is late, the credit file has a mark on it. Those are the things a bank exists to care about. None of them says anything about whether there is equity in a property.

That gap is where HomeSec has been since 2004. We are not here to judge how the tax debt got there, and a garnishee notice on the file does not surprise us. What we look at is whether there is enough unused equity in Australian real property and whether the purpose is a genuine business one — from $20,000 to $5,000,000 against that equity. No financial statements, no credit score threshold, no interrogation. From a clean, complete scenario funds can be available in as little as 24 hours, paid directly to the ATO, and interest can be capitalised for up to six months so nothing is payable while the business gets its breath back. The mechanics are on our garnishee notice funding page.

Back to the notice, because it keeps working while everyone decides what to do about it.

What it reaches, and what it does not

The amount and the frequency depend on what is being garnisheed, and the ATO publishes its approach to each.

1. 1
   A bank account.Up to the available balance in the account or the overdue debt, whichever is less. The ATO expects the institution to search for all of your accounts across all its branches, and lists any account numbers it already knows.
2. 2
   Wages and salary.An employer is usually asked to deduct up to 30 cents in the dollar of post-tax income. A higher share can be sought where there is another source of income, and a lower one where the pay is already subject to another garnishee, such as one for child support.
3. 3
   A merchant card facility.A proportion of what the facility processes — and the ATO can require the institution to pay it before the money is deposited into the business account at all.
4. 4
   Trade debtors.Customers who owe you money are told to pay the ATO instead. This is the one that becomes a commercial problem as well as a cash one, because your customer now knows.
5. 5
   Property sale proceeds and trust money.A notice to the purchaser, agent or solicitor. The ATO's practice statement accepts that such a notice can attach even the part of the price needed to pay out a mortgage, while saying it will not always enforce that and may confine the notice to the surplus after the mortgage is discharged.

There are limits, and they are worth knowing. The ATO says it will not garnishee Centrelink or Department of Veterans' Affairs pensions or benefits unless the taxpayer asks it to. A notice on a superannuation fund does not bite until the member's benefits are payable under the rules of the fund. Notices are not served on courts. And where a small business entity is objecting to the assessment that created the debt, it can apply to the Administrative Review Tribunal under section 32 of the Administrative Review Tribunal Act 2024 for an order affecting the operation of that decision, which can include an order that a garnishee not be issued.

Why it arrived, and what usually comes first

The ATO's stated position is that it sends a warning letter advising you to pay the debt before it issues a garnishee notice, and that it takes this step when other efforts to resolve the debt have not worked or urgent action is needed to protect revenue. The things it says it weighs are worth reading as a list of what makes a notice more likely: how much is owed and for how long, whether you have made reasonable efforts to work with the ATO, whether payment plans have been defaulted, signs of hardship, whether other creditors were paid ahead of the ATO, and whether there is deliberate avoidance or phoenix activity.

Most of those are about engagement rather than money. A business that has been silent for six months is in a materially different position from one that has been in contact and short, and the difference shows up in exactly this decision.

What does not end a garnishee, and what does

Waiting does not. The obligations created by a notice continue until the third party has paid the whole debt or the ATO tells them the notice is withdrawn, although some notices set their own discharge date — three months from issue, for instance — and end then.

Nor does an insolvency appointment, by itself. The ATO's practice statement is explicit that it will not ordinarily withdraw a notice because a voluntary administrator or a small business restructuring practitioner has been appointed, because the company has gone into liquidation, or because an individual has become bankrupt: the notice keeps operating on the relevant amounts. Whether it catches a particular payment depends on when that money became payable, which is a question for a registered liquidator and not one to guess at.

What does end it is the debt being paid, or an arrangement the ATO accepts in its place. Its practice statement says it will consider any reasonable request to withdraw or vary a notice where suitable alternative arrangements for payment are made, and its public guidance repeats that for anyone in financial difficulty. That is a request with figures attached, made in writing, and it is worth making on the day the notice appears.

The first 48 hours

1. 1
   Read your copy of the notice properly.It says who received it, how much they must pay and how often. Those three facts decide whether this is a single hit on a balance or a tap on every dollar the business earns from here.
2. 2
   Ring the ATO the same day.A request to vary or withdraw is assessed on whether there is a workable alternative in front of them. Silence is the one input that has already been counted against you.
3. 3
   Check the contact details the ATO holds for you.The warning letter and the copy of the notice go to whatever address is on file. If that is an old agent or a closed mailbox, the next notice will go there too.
4. 4
   Tell your bookkeeper or tax agent what has happened.They can confirm the balance the notice is based on, whether any of it is an estimate, and whether lodgements that would reduce it are outstanding. A debt built on an estimate is sometimes smaller once the real figures are in.
5. 5
   If a property settlement is coming, raise it before settlement.A notice served on a purchaser or a solicitor can reach the proceeds, including the part earmarked for a mortgage payout. Finding that out at settlement is how a sale collapses.
6. 6
   Work out what the equity could release, in parallel.If the answer is a lump sum, the only real questions are whether there is equity and how quickly it can be reached. That can be answered the same day and commits you to nothing.

When borrowing to clear it is right, and when it is not

Paying the debt out makes sense when the business behind it works and the garnishee is the thing strangling it — when the debt is the residue of a bad year or a client who paid late, and the trading position since has been sound. Clearing the balance removes the notice at its source rather than negotiating around it, and it puts the business back in a position to set up an ordinary payment plan on whatever comes next. Where the debt is large, a payment plan may cover part of it and funding the rest may be unnecessary — ask about that before borrowing the whole figure.

It does not make sense when the tax debt is simply the visible part of a business losing money every month. Borrowing against the family's equity to keep that running is how people lose the house as well as the company, and we would rather say it here. It does not make sense either when the debt is disputed and an objection is on foot, because that is a path with its own remedies. And if there is no meaningful equity in real property, this is not our answer at all: the people to call are the ATO's own hardship line, a registered tax agent, or a registered liquidator if a company is involved.

This page explains what a garnishee notice is and what the options are. It is general information, not legal, tax or insolvency advice: what applies to your situation is a question for a registered tax agent, a lawyer or a registered liquidator, and the ATO's own guidance on garnishee notices and its practice statement PS LA 2011/18 are the primary sources behind everything above.

Reviewed by Paul Stone, Joint Chief Executive