A debt may be recovered by means of a garnishee notice. A garnishee notice may be issued to any person, third party, or organisation (e.g. financial institutions such as banks) that:
Types of payments that can be garnisheed include:
The SSAct requires that a debt either be repaid in full or repaid through deductions from the debtor or another person's social security payment or through payment by instalments under an arrangement negotiated with the debtor. Garnishee action can only generally be pursued if these recovery methods have failed and the debtor refused to enter into a reasonable repayment arrangement, or broke an earlier arrangement to repay their debt.
However, if the delegate determines that these recovery methods are not appropriate in the circumstances of the case, the delegate may proceed straight to garnishee action if the debtor refused to enter into a reasonable repayment arrangement or broke an earlier arrangement to repay their debt.
Act reference: SSAct section 1230C Methods of recovery of debt, section 1233 Garnishee notice
Following the decision to recover a debt by garnishee, a notice must be issued to the third party from whom the amounts are to be garnisheed, which may be written or electronically transmitted. An automated instruction sent between one Commonwealth entity and another, such as between Centrelink and the ATO, is sufficient to satisfy the notification requirement.
A copy of the notice must also be issued to the debtor. However, the copy of the notice need not be an exact copy and need not take the same form as the original notification. The copy need only contain enough information to enable the debtor to know that they have been garnisheed and also the amount or percentage by which they have been garnisheed.
Act reference: SSAct section 1233 Garnishee notice
Electronic Transactions Act 1999 section 9(1) Requirement to give information in writing, section 11(3) Integrity of information
The date by which the garnishee payment must be made cannot be before either:
Failure to comply with the garnishee notice will result in a debt for the party who received the garnishee notice. The debt may be recovered from them by legal proceedings, or a further garnishee notice and they may have to pay penalty interest.
Act reference: SSAct section 1230 Debt from failure to comply with garnishee notice, section 1233 Garnishee notice
For more information on statutory limits, refer to 6.7.3.08.
Act reference: SSAct section 1233(7A) Subject to subsections (7C), (7D) and (7E)..., section 1233(7C) If (a) subsection (7A) applies so that action under this section for the recovery of a debt..., section 1233(7D) If (a) subsection (7A) applies so that action under this section for the recovery of a debt..., section 1233(7E) If (a) subsection (7A) applies so that action under this section for the recovery of a debt...
For more information on the effects of bankruptcy on debt, refer to 6.7.3.05.
A payment of arrears of a person's (or another person's) social security payment should not be garnisheed in order to repay a debt. Instead, the arrears payment can be withheld or deducted from the person's (or another person's) social security payment as repayment towards a debt.
Act reference: SSAct section 1231AA Application of sections dealing with deductions
Where a garnishee notice is issued to a financial institution against a term deposit, the notice immediately attaches to that account. However, the financial institution is not liable to pay the garnisheed amount until the term deposit matures or is terminated by the debtor. The garnishee notice should be issued before the term deposit matures.
Although there is no restriction in approaching the debtor to discuss early termination of the term deposit, there is no legal requirement for the debtor to agree to do so.
The only circumstances in which a garnishee notice should be issued against a trust fund are:
Example: Fitz opens a bank account on trust for Anji (the debtor). Fitz's account can be garnisheed to recover Anji's debt if there are sufficient funds in the account to satisfy full or part repayment of the debt.
It may be difficult to determine whether a trust exists. Such cases should be referred for specific advice.
A garnishee notice should not be issued against a trust fund where the debtor is a beneficiary of the trust, but is not owed money by the fund.
A garnishee notice should not be issued against a superannuation fund under any circumstances.
A garnishee notice should not be served on the executor of a deceased person's estate. While SSAct section 1233 provides that a garnishee notice may be issued against a person who 'holds ... money for or on account of the debtor', deceased people are not considered debtors, which means that the executor cannot hold 'for or on [their] account'. Instead, the estate becomes the debtor.
To recover a debt from an estate, the debt needs to first be raised against the estate, and notice of the debt sent to the executor. This is not a garnishee notice. If there are sufficient funds in the estate to repay the debt, the debt must be repaid. If there are insufficient funds, then the debt will be permanently written off as irrecoverable.
Act reference: SSAct section 1233 Garnishee notice
Last reviewed: 12 November 2012