ATO Garnishee Notices: Why Property Sales Are the Real Risk Point

Most garnishee actions don’t begin with bank accounts - they crystallize at property settlement.

When tax debts remain unpaid, the Australian Taxation Office (ATO) has a powerful enforcement mechanism available: the garnishee notice.

While garnishee notices can apply in many situations, the most serious consequences tend to arise at one specific moment - when a property is sold.

That is often when a tax issue that has existed quietly in the background becomes very real, very quickly.

What a Garnishee Notice Really Means

Under the Taxation Administration Act, the ATO can issue a garnishee notice if:

• a tax debt remains unpaid after the due date, and

• suitable arrangements have not been made to resolve that debt.

In simple terms, the ATO does not need a court order. It can legally direct a third party who owes you money - or who is holding money for you - to pay that amount directly to the ATO instead.

That third party can include:

• a bank

• an employer

• a client or trade debtor

• a solicitor or agent holding money on your behalf

• a purchaser of your property, where funds are held in trust at settlement

Yes - money from the sale of property can be redirected to the ATO before it ever reaches you.

Why Property Sales Are Different

Many taxpayers assume garnishee notices mainly affect bank accounts or wages. In practice, those situations are often incremental and ongoing - income flows over time, and engagement with the ATO may still be possible.

A property sale is different.

At settlement:

• a large, fixed amount becomes payable

• funds are held by a third party (usually a solicitor or conveyancer)

• the amount is known, identifiable, and immediately accessible

• ownership has already transferred

At that point, the ATO does not need to wait, negotiate, or reassess.

It can intercept the funds at source.

This is why property transactions are frequently where unpaid tax debts crystallize into enforcement action.

The Risk Most People Don’t Anticipate

In many cases, the tax debt itself isn’t new. What’s new is the event that creates a clear enforcement opportunity.

The danger is not the existence of the debt - it’s the moment when:

• money is about to change hands

• it is held in trust

• and the ATO has legal visibility and authority

A garnishee notice issued shortly before settlement can redirect part - or all - of the sale proceeds to the ATO, often leaving little room to maneuver once the transaction is underway.

Why Timing Matters More Than Intent

From the ATO’s perspective, a property sale represents certainty:

• certainty of funds

• certainty of amount

• certainty of compliance by the third party

This is very different from future income or ongoing cash flow, which is inherently variable.

Once settlement funds exist, the ATO’s position is strong and the taxpayer’s flexibility is limited.

At ZT Partners

At ZT Partners, we see garnishee notices as an end-stage outcome, not a surprise tactic.

Our focus is on helping clients:

• understand where garnishee risk actually concentrates

• identify high-risk events such as property sales early

• address tax positions before transactions are locked in

• avoid disruption at settlement, when leverage is lowest

The issue is rarely the debt alone. It’s the timing of the transaction.

A Practical Perspective

Tax debts can often be managed over time. Property sales cannot.

Once funds are sitting in a trust account awaiting settlement, the ATO’s enforcement options are at their strongest - and options to restructure or delay are largely gone.

Understanding that distinction early is what prevents outcomes that feel sudden, but are entirely lawful.

If a property transaction is on the horizon, this is the time to review your tax position - not once contracts are signed.

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