ATO Ups the Ante with Garnishee Orders

The Australian Taxation Office is getting tough on collecting unpaid taxes, we have been hearing this across media, and as accountants we have heard it direct from the tax office.

The ATO are now making more common use of garnishee orders recoup unpaid debts.   The ATO do stress that this is a last resort that they would prefer clients or their agents to speak to the ATO and organise a payment plan rather than the ATO having to obtain garnishee orders.

The ATO have also stated that they will continue to offer some small businesses with good track records Interest Free 12 month payment plans.  These payment plans will only be available if the client agrees to a direct debit facility for the payment of the amounts.

According to the ATO the number of Garnishee orders issued in relation to small business with a turnover of less than $2million declined during the 2009 year from the 2008 year, however accountants from all over the country are stating that the ATO are not agreeing to payment plans as easily as they were last year.  In particular if a client has a large tax debt accrued over a number of periods, or has defaulted on a previous arrangement.  Accountants believe the reason for the stronger stand is the growth in the tax debt of small business from $3billion in 2008 to $15billion currently.

The ATO are increasingly resorting to garnishee orders and large penalties to try to reel in the debt, another solution by the ATO is to give a large number of the smaller debts to debt collectors to try to collect.

The type of garnishee notices most commonly being issued allow the taxpayer the option of paying 30% of the balance in the bank account or the outstanding tax debt whichever is lower.  usually the ATO only use them when the debt is relatively large or outstanding for a long time.  The ATO are also issuing a larger number of director penalty notices for unpaid PAYG withholding liabilities.