Everything You Need To Know About NSW Garnishees

Nov 29, 2021 | Uncategorised

A Garnishee order, in NSW, or anywhere in Australia, is a mechanism to collect funds to cover an unpaid debt.

A garnishee order may be issued to recover debts from an individual. The Australian Taxation Office (ATO) may issue a garnishee order to recover unpaid tax debts against a company.

This article will outline garnishee orders, what they are and how they work. We will summarise actions an individual or company might take to reduce the consequences, which can be severe!

Garnishee Order for Individuals

How did we get to this stage?

A plaintiff (debtor) has taken a claim for an unpaid debt to court. The court has found the case for the plaintiff and has decided the debt, often including the plaintiff’s legal costs, must be paid. The defendant normally has 28 days to settle the debt in full.

If the debt remains unpaid after 28 days, the plaintiff may return to court and take enforcement action to force the defendant to pay via a garnishee order.

Garnishee Order for Wages or Salary

This order is served on the employer of the defendant. The employer is the garnishee and the order is to withhold wages until the debt is settled. The employer must take a sum of money from the wages of the defendant and pass it to the plaintiff.

This is the most common type of garnishee order. There is no requirement to provide notice to the defendant, who may not realise until they check their bank account and see their wages are less than usual!

There is an amount of money that must be paid as wages, known as the ‘weekly compensation amount’ so there is some money to live on. The employer may deduct a small sum to cover their administration costs and everything else repays the unpaid debt.

Garnishee Order for Debts

A garnishee order for debts is issued to a person or organisation that holds money or makes payments to, the defendant. This may be a bank or building society or a real estate agent that passes on rent to the defendant. They will be ordered to make a single payment to settle the debt in full. There must be a minimum value left in the account, as above, for living costs.

How to stop the order

An individual may try to stop their bank account or wages from being garnished by paying the debt or negotiating a payment plan with the debtor.

Alternatively, the debtor may make one of the following applications to the court:

A stay of enforcement

The application to the court consists of a form stating the defendant intends to pay the debt in full. The form must detail where the defendant plans to get the money to pay the debt and when they expect to pay.

If granted, enforcement action (the garnishee order) will be put on hold until a date determined by the court.

Set aside the default judgement

If the defendant believes the original judgement against them was false, they may apply to have it set aside. They need to explain their defence against the claim and why they didn’t defend themselves at the original court hearing.

Pay the debt by instalments

An application is made to the court to pay off the debt by instalments. The defendant must complete forms detailing their income, assets and expenses, plus any other debts and repayments.

The registrar will review the financial information and assess whether the proposed instalments can realistically be made. They will also consider whether the proposed plan will pay the outstanding debt within a reasonable time.

If the application is accepted by the court, and payments are made in full, as scheduled, enforcement action will cease.

ATO Garnishee Orders for companies

While completing its duty to collect taxes from millions of Australian companies, each year, the ATO faces compliance issues. Garnishee orders are one of the methods used to collect unpaid tax debts.

As with individuals, there are two common types of garnishee issued by the ATO:

Garnishee to bank accounts

A garnishee notice is served directly to the company’s bank ordering them to release funds from one of the company’s business accounts directly to the ATO.

Garnishee to debtors

The ATO issues a garnishee order to one or more of the company’s debtors. All payments from the garnishee debtors will no longer be made to the company’s accounts but will be paid to the ATO until the tax debt has been cleared.

Consequences for the company

Unlike garnishee orders for individuals, there is no regard for the financial consequences for the company. If there is no alternative revenue the ATO garnishee can have a major impact on the company finances and ability to continue trading.

Seek professional advice. This is a serious issue and requires the assistance of experts such as the team at Corporate Lifeline.

Corporate Lifeline – Help and advice when you need it

If you or your company have been impacted financially by a garnishee order, you should seek advice immediately.

Corporate lifeline have helped hundreds of Australian companies to overcome financial difficulties and get back to profitable trading. We can help you. Contact Corporate Lifeline today. We can work together to get your company back on track and profitable again.


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