Are Garnishee notices appropriate action for the ATO?

Ross Greenwood speaks to Australian Small Business and Family Enterprise Ombudsman Kate Carnell who says the use of garnishee notices by the Australian Taxation Office is a concern, despite a review by the inspector-general of tax.

Ross Greenwood:  On the program last night, we told you about a response from the Inspector General of Tax to the criticisms of the Australian Tax Office and it’s handling of issues with small businesses. Now, you might be aware that there was criticism of the tax office that came from, not only reports in the Fairfax Media, including the Sydney Morning Herald, but also on the ABC’s Four Corners program. Much of that centered on whistleblowers from inside the tax office but also small businesses and their own experiences.

The Inspector General of Tax’s report broadly cleared the tax office of issuing garnishee notices. These are notices, legal notices, where a person’s bank account or a businesses’ bank account can be accessed without their consent by the tax office and that was a big issue. Last night we spoke to the tax office’s deputy commissioner for small business, Deborah Jenkins. Here’s just a little of what she told us.

Deborah Jenkins: Our staff continue to use the appropriate guidelines and they were never given revenue targets. Sometimes a garnishee notice we do find is actually the point at which people want to engage with us. We use garnishee notices when people aren’t engaging with us. What I would say to people is, don’t wait until you get that garnishee notice to get in contact with us.

Ross Greenwood:  One person who would take many criticisms from small businesses who felt they were being dealt an unfair hand by the tax office is Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, who’s online right now. Kate, many thanks for your time.

Interview with: Kate Carnell, Ombudsman, Small Business and Family Enterprise

Kate Carnell: It’s a pleasure, Ross.

Ross Greenwood:  You have seen the report from the Inspector General of Tax. You probably have heard some of the responses for Deborah Jenkins, the deputy commissioner at the ATO. Does that equate with you what you had been hearing from some of the small businesses complaining to you?

Kate Carnell: I think Deb Jenkins is doing a great job, looking after small business, but I have to say it doesn’t equate to what we’re hearing. Even the Inspector General found that there was over 24,000 garnishee notices issued in 2016-2017. Now, they’re saying it’s a literally good outcome because it’s based on the year before but that’s one every five hours. Let’s be fair, what this means, is the ATO comes in and freezes your bank account or takes money out of your bank account without your agreement or can even take money from somebody who owes you money, like creditor or whatever, without approval of a court or without whatever.

If running a small business– If the tax office comes in and takes money out of your account, and sometimes all of the money out of your account, what does it mean? You can’t pay your suppliers, you can’t pay your staff, and you can’t trade. This is extraordinarily action from the government. I don’t know anybody who has the capacity when somebody hasn’t– isn’t a terrorist or something, something really egregious, they can actually put you out of business with an order and that’s what garnishee orders do and that’s our concern.

Rose: One of the issues here, Kate, I was going to say, is surely as we’ve heard, the garnishee notice would be the last option because the person has been contacted on numerous times, “Pay your bills, you’re behind. Pay your bills. Please pay your bills.” There’s a point at which everybody is going to say, “Enough is enough.” We can save money there, but the problem is, I guess, the communication of when is enough, enough, and what sort of notice you’ve been given that those legal orders are going to be put in place.

Kate Carnell: Absolutely. If somebody is really doing the wrong thing, in other words, not paying the tax that is due and they have the money available to do so, then I absolutely agree. The ATO should do what they have to do to get that money. The dilemma we’ve got with this, is that we see situations where the ATO may not have been in touch quite as often as they should have, that the decision to what is really close to business ban in many circumstances, because that’s what this delivers, isn’t the appropriate action for the ATO to take. At the end of the day, what this means, if the business can’t trade, then a whole lot of other people are going to hurt, aren’t they? The people that that business may owe money to, staff or lots of people.

The ATO takes their money and others don’t get their money. You better make sure that these are used, if at all, and I have to say, I’m fascinated that the ATO can do this without any oversight, say for a court order or anything, they can just decide to do it, and the outcome can be really significant, e.g., the business can’t pay the wages tomorrow. We had one particular case where that’s what happened. The garnishee happened particularly on the night before the wage run was supposed to happen at which stage the staff weren’t paid.

Ross Greenwood:  This doesn’t work and that’s interesting because we’ve had similar examples of that come to us just over the past 24 hours as well. Before I let you go, there’s a separate issue on today, and that is the franchise industry, does face tougher enforcement regimes after there was a parliamentary inquiry into the franchising code of conduct, an area of business that we have been highly critical of in the past. This particular parliamentary committee which had been basically put together at the behest of Senator Wacka Williams, about to retire. This 369-page report will come back into your belly because it is an important inquiry because in the past some of these types of inquiries have been ignored by the government and by the industry overall.

Kate Carnell: Let’s hope they don’t ignore this one. This is actually a really good piece of work. Now, we’ve all only had it since midmorning, this morning, so I can’t say that we’re on top of every single page, but the recommendations are very much in line with what my office suggested should happen. This will go a long way to give franchisees some protection to hold franchise always to account, to ensure that contracts comply with unfair contract terms, legislation to ensure that there’s more transparency, that people who are entering into franchisee agreement know the figures, that what they’re told is right, is appropriate. There’s a lot of good bits in this law. Let’s hope that this doesn’t sit on the shelf, and we’ll be certainly working very hard to make sure that doesn’t happen.

Ross Greenwood:  Great stuff. We will be speaking with Senator John “Wacka” Williams. He was instrumental in putting it together. The inquiry was chaired by Michael Sukkar.

Kate Carnell: Ross, can I just say one thing?

Ross Greenwood:  Of course.

Kate Carnell: We’re going to miss Wacka so much.

[chuckles]

Ross Greenwood:  There’s no doubt about that. Could I just say, you’re 100% right. We’ve spoken to him previously about his life and times. As somebody who was driven; there’s not too many politicians who genuinely wear their heart on their sleeve and seek at every stage to do the right things, it is no doubt, he’s one of them.

Kate Carnell is the Australian Small Business and Family Enterprise Ombudsman, and Kate, always great to have you on the program as well.

Kate Carnell: It’s a pleasure, Ross.

Image source: 2GB

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