The ATO on Mon 25.2.2013, released a Decision Impact Statement on the Qld Supreme Court decision of McMurdo J in Hansen Yuncken Pty Ltd v Ian James Ericson trading as Flea’s Concreting & Anor [2012] QSC 51. In that decision, the Court held that a garnishee notice issued by the Commissioner under s 260-5 of the Taxation Administration Act 1953 in respect of a debt owed by a third party to a taxpayer, does not give the Commissioner a proprietary interest in the debt, but rather a statutory charge over the debt while it continues to exist. As a result, in this case where the debt subject to the notice was paid into court and ceased to exist in the circumstances, the Commissioner had no entitlement to the moneys.
The ATO said that, in so far as His Honour decided that the Commissioner did not have any proprietary interest in the money, the decision was consistent with settled authority. Also, His Honour’s conclusion that the garnishee notice created a statutory charge over the debt was also consistent with the authorities, the ATO said. However, the ATO considers His Honour’s view that the payment of monies, which was the subject of a garnishee notice, into court extinguishes the obligation of the recipient of the notice to comply with the notice, may be inconsistent with the earlier authorities of DCT v Government Insurance Office of NSW (1992) 23 ATR 378 and Macquarie Health Corp Ltd v FCT (1999) 43 ATR 650.
The Commissioner says he proposes to raise this issue in future cases to seek clarity on any conflicting authorities. The Commissioner will continue to permit the payment into court of moneys that is the subject of a garnishee notice and to which there exist competing claims. However, so as to avoid any unnecessary litigation, the Commissioner says he will only be agreeable to this course of action where all parties expressly agree that the payment into court by the notice recipient is not intended to, nor does it, extinguish the liability owed by the notice recipient to the tax debtor.
In circumstances where a notice recipient has paid money into court without the knowledge of the Commissioner, the Commissioner says he reserves his rights in appropriate instances to:
- seek to enforce his rights under the garnishee notice such that any moneys paid into Court do not affect the Commissioner’s statutory rights under s 260-5; or
- institute proceedings in debt as against the notice recipient for incorrectly paying amounts into court rather than in accordance with the statutory obligation imposed by s 260-5.
[LTN 37, 25/2/13]