The Inspector-General of Taxation has launched a review into how the Australian Taxation Office (ATO) issues garnishee notices after a Four Corners and Fairfax investigation last month suggested tax office staff were being directed to issue garnishee arrangements to small businesses as “standard” practice.
Inspector-General Ali Noroozi tells SmartCompany his office will be seeking “a complete picture” of how the ATO uses its garnishee powers to take control of the bank accounts of individuals and businesses in order to recover tax debts.
“The issues with garnishee notices are serious allegations that have been made. It’s my job to investigate and address these issues, to provide assurances to the community,” Noroozi says.
The Four Corners investigation claimed more and more small businesses are being hit with garnishee notices to the detriment of their cash flow, with the tax office reportedly directing staff to apply garnishee arrangements to every case they came across during certain periods.
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For small businesses, garnishee notices allow the ATO to notify your bank, trade debtors or suppliers of merchant facilities, and instruct funds to be paid directly to the tax office to cover tax debts.
The allegations prompted Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell to launch her own inquiry into ATO processes, asking small businesses to share stories of disputed tax debts.
Noroozi says as the Inspector-General of Taxation, it’s his responsibility to hear from companies and individuals to establish whether the claims made earlier this year represent any kind of pattern.
“We want to know about people’s experiences — good or bad,” he says.
Groups like Self-Employed Australia have argued for an overhaul of the garnishee system, observing that some businesses dispute their tax debts but get hit with a garnishee arrangement anyway.
In a statement on the terms of reference for his inquiry, Noroozi says “cash flow is the lifeblood of small businesses, and, if inappropriately disrupted, can have an unjustified and devastating effect on them”.
Businesses and individuals are invited to make submissions on the topic of garnishee notices, with Noroozi telling SmartCompany he wants to hear details of all people’s experiences with the tax office on this front.
This includes how business owners first found out that their accounts were subject to garnishee arrangements and any details of warnings they received before this happened.
“Communication is always key, so we want to know all about that in this case,” he says.
Small businesses are encouraged to contact the Inspector-General of Taxation’s office to make a submission. Further details can be found here.