Summary
The Australian Taxation Office (ATO) may in certain circumstances issue garnishee notices on individuals who hold property for a debtor.
However, in two recent cases the High Court of Australia and the Federal Court of Australia have clarified that the ATO cannot issue garnishee notices for either pre- or post-liquidation taxation liabilities of a debtor.
Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation [2009] HCA 32 (Bruton Holdings)
In Bruton Holdings the High Court held that the ATO cannot issue garnishee notices for taxation liabilities incurred before the liquidation of a Company for the following reasons:
Section 500(1) of the Corporations Act 2001 (Cth) (Corporations Act) specifies all attachments against the property of a company in liquidation are void; and
Garnishee notices are attachments for the purposes of the Corporations Act.
Bell Group (in liq) v Deputy Commissioner of Taxation [2015] FCA 1056 (Bell)
Bell concerned the validity of a garnishee notice issued by the ATO to the National Australia Bank for funds held for the company in liquidation. The taxation liability in question arose after the appointment of a Liquidator.
The Federal Court of Australia held that the ATO cannot issue garnishee notices for taxation liabilities incurred after liquidation of a Company for the following reasons:
The power conferred on the ATO by section 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) to collect debts from third parties is not available where a debtor Company is in liquidation; and
Attachments against the property of a company in liquidation are void (s 500(1) Corporations Act) and garnishee notices are attachments.