Question 1

Can the ATO garnishee my bank account for unpaid tax?

Accepted Answer

Yes, the ATO has the power to issue garnishee notices under Section 260-5 of Schedule 1 to the Taxation Administration Act 1953. A garnishee notice can be sent to your bank, your customers, or anyone who owes you money, directing them to pay funds to the ATO instead of to you. The ATO typically uses this power after other collection attempts have failed and you have not engaged with them to arrange payment. They must issue the notice in writing and it takes effect immediately. If you receive a garnishee notice or believe one is imminent, seek professional help immediately. At BVM, we help clients across Sydney negotiate with the ATO before enforcement action escalates.

Question 2

What is a director penalty notice and when does the ATO issue one?

Accepted Answer

A Director Penalty Notice (DPN) makes company directors personally liable for unpaid PAYG withholding, superannuation guarantee charge, and GST. The ATO issues a DPN when these amounts remain unpaid after the due date. There are two types. A non-lockdown DPN gives you 21 days to either pay the debt, place the company into administration, or begin winding up. A lockdown DPN applies when BAS or SG returns are more than three months overdue, and in this case administration or liquidation will not release you from personal liability. The only option is to pay. Our team at BVM helps directors in South West Sydney respond to DPNs promptly and effectively.

Question 3

How do I set up a payment plan with the ATO?

Accepted Answer

You can set up a payment plan with the ATO online through myGov (for debts under $200,000), by phone, or through your registered tax agent. The ATO will consider your ability to pay based on your financial situation. You will need to propose regular payment amounts and a timeframe for clearing the debt. Interest (General Interest Charge) continues to accrue on the outstanding balance at a rate currently around 11.36% per annum. The ATO generally expects the debt to be cleared within 12 to 24 months, though longer arrangements are possible for larger debts. Keeping all future lodgements and payments current is a condition of maintaining your plan. At BVM, we negotiate payment plans for clients across Oran Park and ensure the terms are manageable.

Question 4

Can ATO debt be included in a small business restructure?

Accepted Answer

Yes, under the Small Business Restructuring (SBR) process introduced in January 2021, eligible companies can propose a restructuring plan to creditors, including the ATO. To qualify, your company must have total liabilities under $1 million, all tax lodgements must be up to date, and employee entitlements must be current. A Small Business Restructuring Practitioner develops a plan proposing how much creditors will receive, typically cents in the dollar. Creditors vote on the plan and it passes if a majority in value agree. The ATO participates as a creditor and will consider the proposal based on whether it delivers a better outcome than liquidation. Our CPA qualified team at BVM helps eligible businesses across Sydney explore this option.

Question 5

What is the ATO hardship provisions and do I qualify?

Accepted Answer

The ATO can provide relief if paying your tax debt would cause you serious hardship. This means the payment would leave you unable to provide food, accommodation, clothing, medical treatment, or education for yourself or your dependants. Hardship relief can include releasing you from all or part of the debt, waiving the General Interest Charge, or deferring collection activity. To apply, you need to demonstrate your financial position through bank statements, income details, and a list of assets and liabilities. The ATO assesses each case individually. This provision applies to individuals, not companies. At BVM, we help clients in Sydney prepare hardship applications with the supporting evidence the ATO requires.

Question 6

How long does the ATO give you to pay a tax debt?

Accepted Answer

There is no fixed timeframe that applies to all taxpayers. The ATO assesses each situation based on the amount owed, your payment history, and your capacity to pay. For smaller debts, they may accept a plan of 6 to 12 months. Larger debts may be given 24 months or longer if you can demonstrate consistent payments and ongoing compliance. The ATO expects you to pay as much as you reasonably can, as quickly as possible. If you ignore the debt or fail to engage, they will escalate to firmer action including garnishee notices, DPNs, or legal proceedings. Engaging early always produces better outcomes. Our team at BVM helps clients negotiate realistic timeframes with the ATO.

Question 7

Can I negotiate to reduce the amount I owe the ATO?

Accepted Answer

The ATO does not generally negotiate to reduce the principal tax debt itself. However, there are several ways the total amount can be reduced. You can request remission of penalties if you have a reasonable excuse for late lodgement or payment. You can apply for remission of the General Interest Charge if circumstances beyond your control contributed to the debt. If you are experiencing serious hardship, the ATO may release part of the debt. Through the Small Business Restructuring process, creditors (including the ATO) may accept less than the full amount owed. In all cases, having your lodgements up to date strengthens your position. At BVM, we help clients across South West Sydney pursue every available avenue to reduce their ATO liabilities.

ATO Tax Debt & Recovery FAQs