Garnishee notice vs statutory demand: what is the difference?
Short answer
A garnishee notice is a collection tool: the ATO takes money directly from a third party who holds or owes you money, with no court involved. A statutory demand is an insolvency step against a company: 21 days to pay or deal with it, after which the company is presumed insolvent and the ATO can apply to court to wind it up.
Side by side
| Garnishee notice | Statutory demand | |
|---|---|---|
| Who it is used against | Individuals, sole traders, companies, trusts | Companies only |
| Who receives it | A bank, employer, customer or other third party, with a copy to you | The company, served at its registered office |
| Court involved? | No | Not for the demand itself; the court is next if it is ignored |
| What it does | Takes money and applies it to the debt | Demands payment and starts a 21 day clock |
| Deadline | None for you; the third party acts on it straight away | 21 days from service, cannot be extended |
| If nothing happens | The money is taken; further notices may follow | Company presumed insolvent; winding up application follows |
| Usual way out | Lodge, propose a payment plan, ask for withdrawal | Pay, agree a plan in writing before day 21, set aside (rare), or appoint a practitioner |
What each one signals
A garnishee says the ATO believes you have money or income and has decided to collect it rather than keep waiting. It is unpleasant, but it is still a collection step. The debt stays with you, the business keeps operating, and the ATO says it may withdraw or vary the notice once suitable payment arrangements are made. Individuals and sole traders can receive garnishee notices; they cannot receive statutory demands, because that process only exists for companies.
A statutory demand says the ATO is prepared to end the company. It is only used against companies and the point of it is the presumption of insolvency that arises after 21 days. Once that presumption exists, the ATO can file a winding up application and the burden shifts to the company to prove it is solvent. Phone conversations do not stop the clock; only payment, a written arrangement confirmed by the ATO, a court order setting the demand aside, or appointing a restructuring practitioner, administrator or liquidator changes the position.
The two are not alternatives. A company can be garnisheed and served with a statutory demand for the same debt, and directors can also receive a director penalty notice for PAYG withholding, GST and super components. Each has its own clock and its own way out.
Garnishee or statutory demand?
Either way, a specialist can tell you the real deadline and the options. Free and confidential.
Which one do I have?
If money has gone from an account or a customer has been told to pay the ATO, it is a garnishee. If a formal document headed "Creditor's statutory demand for payment of debt" has been served on the company's registered office, with an affidavit attached, it is a statutory demand and the 21 days started on the day of service, whether or not anyone read it.
The response differs. For a garnishee, the priority is engagement: lodge, put a payment plan in place, ask for the notice to be withdrawn. For a statutory demand the priority is the calendar: work out day 21, and decide with advice before then whether the company pays, agrees a written arrangement, or enters a formal process such as small business restructuring. Both situations are easier to resolve early. Neither improves by being ignored, and the ATO's firmer action tends to escalate from one to the other when a debt is not engaged with.
What to do next
- Identify which document you have: a copy of a notice sent to a third party, or a creditor's statutory demand served on the company.
- For a garnishee, bring lodgements up to date and call the ATO on 13 11 42 about a payment plan and withdrawal of the notice.
- For a statutory demand, calculate day 21 from the date of service and get advice on the options before that date.
Related questions
Can the ATO issue a statutory demand to a sole trader?
No. A statutory demand is a company insolvency tool under the Corporations Act. Against an individual or sole trader the ATO uses garnishee notices, and if it wants to pursue insolvency it would obtain a judgment and issue a bankruptcy notice instead. Bankruptcy has its own timeframes and consequences for tax debt.
Does a payment plan stop a statutory demand the way it can stop a garnishee?
Only if the ATO agrees to it in writing before the 21 days run out. A plan agreed on the phone does not by itself stop the presumption of insolvency arising. Ask the ATO to confirm in writing that it will not proceed on the demand while the plan is maintained.
Garnishee or statutory demand?
Either way, a specialist can tell you the real deadline and the options. Free and confidential.
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