5.2.9 Collection from Third Parties
The Registrar can issue a notice to someone who owes money to a relevant debtor requiring that the money be paid to the Registrar in satisfaction of relevant debts (CSRC Act section 72A). This power is separate from the Registrar's power to intercept tax refunds (5.2.8), deduct amounts from a social security entitlement (5.2.5) or deduct amounts from a veterans' pension or allowance (5.2.7).
Additionally, where a person within Australia is controlling money on a relevant debtor's behalf while the relevant debtor is overseas, a notice may be issued requiring the money be paid to the Registrar (CSRC Act section 72B).
See 5.2.8 for the definitions of 'relevant debt' and 'relevant debtor'.
CSRC Act section 72A, section 72B
CSRC Regs section 31 to section 35
Defence Forces Retirement Benefit Act 1948 section 85
Life Insurance Act 1995 section 205
National Disability Insurance Scheme Act 2013 section 46A
SS(Admin)Act section 238
Superannuation Act 1976 section 118
Superannuation Act 1990 section 41
Veterans' Entitlements Act 1986 section 125
On this page
- What is a section 72A notice?
- Which debts can be recovered?
- What funds can be attached?
- Joint bank accounts
- Company bank accounts
- Credit card accounts
- Term deposits
- Trust accounts & trust property
- Partnership funds
- Share dividends & company director fees of a company
- Deposits held by real estate agents & proceeds of a property sale
- Mortgage offset account
- Excess funds paid onto a loan
- Solicitor liens
- Superannuation funds
- Life insurance
- Income protection insurance
- Veterans' Affairs pensions
- Social security payments
- National Disability Insurance Scheme payments
- Inalienable benefits in a bank account
- Commonwealth inscribed stock or bearer securities
- Travellers cheques, foreign currency, shares, gold
- Money held by a court
- Payments to taxi drivers
- Money payable to a bankrupt
- Effect of compliance or non-compliance
- Requirements of a section 72A notice
- Service of notices
- Payment made by relevant debtor
- Collection within Australia where relevant debtor is outside Australia
What is a section 72A notice?
The Registrar can issue a section 72A notice to any person who holds money for, or on behalf of, a relevant debtor, or to any person who may hold money for the relevant debtor in the future. A notice issued to a person under section 72A of the CSRC Act requires that person to pay the money to the Registrar. Notices are commonly used to collect money held in bank accounts and for the proceeds of property settlements (i.e. house sale) which become due to the relevant debtor. The maximum notified deduction total is an amount specified in a notice under section 72A(1) of the CSRC Act that does not exceed the relevant debt of the relevant debtor to whom the notice relates.
A section 72A notice is similar to a garnishee order obtained from a court by a creditor who has obtained judgment against a debtor. However, the Registrar does not need the approval of a court or to have obtained judgment prior to issuing a notice under section 72A. Notices under section 72A should not be issued on a speculative or 'fishing' basis.
A section 72A notice will require a third party to pay to the Registrar, until the debt is satisfied:
- an amount equal to the maximum notified deduction total (if a person holds more than the amount specified in the notice (CSRC Act section 72A(1)(e)),
- the amount of money being held (if the person holds an amount equal to, or less than, the maximum notified deduction total specified in the notice (CSRC Act section 72A(1)(f)),
- specified ongoing payments (if the person becomes liable, from time to time, to make payments to the debtor and the notice specifies an amount until the maximum notified deduction total is satisfied (CSRC Act section 72A(1)(g)). This allows the Registrar to collect from contractors who make payments to a subcontractor in a manner similar to a garnishee order made by a court.
A section 72A notice remains in force until complied with in full or it is withdrawn by the Registrar in writing.
Which debts can be recovered?
The Registrar can issue a section 72A notice to recover:
- an overdue child support debt, including an amount equivalent to any child support that the Registrar has already paid to the payee from consolidated revenue because it was expected to have been remitted by the child support debtor's employer, but was not in fact deducted from the child support debtor's salary,
- arrears of child support that the Registrar has assessed for a prior period, but which are payable in the future,
- carer debts (see 5.5.5 for further information)
- a child support debtor's late payment penalties (see 5.1.6 for further information),
- a relevant debtor's penalty for underestimating adjusted taxable income (an estimate penalty, see 2.5.1 for further information),
- any court-ordered costs payable to the Commonwealth in respect of an offence committed by a person under the CSRC Act or the CSA Act,
- any amount ordered by a court, upon the conviction of a person for an offence against the CSRC Act or CSA Act, payable to the Registrar,
- a recovery order which the Registrar has registered for collection as a child support debt.
The Registrar can also use a section 72A notice to recover any child support due but not yet payable, however, the Registrar will only do so in special circumstances.
A section 72A notice cannot be used to recover other types of debts, such as:
- amounts of child support that may become due and payable in the future,
- an employer's late payment penalties (see 5.2.4 for further information),
- an employer's penalty for failure to make a deduction (see 5.2.4 for further information),
- employer penalties for unexplained remittances,
- amounts under section 47(1) of the CSRC Act that have not been remitted by the employer by the due date.
What funds can be attached?
A notice under section 72A is only effective where funds can be identified as owed to a relevant debtor and there is nothing that prevents the operation of the notice.
See below for examples of the types of funds against which a section 72A notice may or may not be issued.
Joint bank accounts
A notice under section 72A cannot be effective against a joint bank account because it is not possible to identify any portion as belonging solely to one owner (DFC of T v Westpac Savings Bank Ltd 87 ATC 4346).
Company bank accounts
Funds held in a bank account that is in the name of a company are held by the company as a legal person, not by the relevant debtor. The funds in such an account cannot be said to be payable to the relevant debtor, even if the relevant debtor is the sole signatory to the account or the sole director or shareholder of the company.
Credit card accounts
A section 72A notice should not be issued on the credit balance of a credit card account unless the Registrar can determine that the balance is money due, or held for, the relevant debtor. This will depend on the specific contractual arrangements between the bank and the debtor. These arrangements vary from one bank to another, as does the way in which the bank treats any credit balance.
The Registrar can require payment from a person's term deposit upon receipt of a section 72A notice where the terms and conditions of the term deposit allow for the person to be paid the monies prior to the maturity date (i.e. they are repayable upon demand) (CSRC Act section 72A(12) and Macquarie Health Corp Ltd v Commissioner of Taxation  FCA 1819).
Trust accounts & trust property
If a relevant debtor is a trustee of funds held in a bank account, a section 72A notice to the bank in relation to those funds will not be effective. A trustee holds the trust funds for the benefit of others (the beneficiaries) and does not own the funds for their own use. The same applies to a relevant debtor who holds trust property.
The Registrar can issue a section 72A notice to a trustee who holds money in trust for a relevant debtor. That notice will only be effective when the trust deed authorises the trustee to make a distribution or payment to the relevant debtor from the trust funds or from the sale of the trust property.
Funds held by a partnership are held jointly by the members of the partnership. However, it is possible to serve a section 72A notice on a partner in relation to any distribution that they may make to the other partner/debtor.
Share dividends & company director fees of a company
If a relevant debtor is a director or a shareholder of a company, a section 72A notice can be issued on the company for a percentage of any distribution made to the relevant debtor. When the company distributes a dividend to the relevant debtor (where the relevant debtor is a shareholder) or director's fees (where the relevant debtor is a director) the notice should be complied with.
Deposits held by real estate agents & proceeds of a property sale
The Registrar can issue a section 72A notice to a real estate agent for funds held as a deposit against the sale of a property by the relevant debtor.
The deposit remains the property of the purchaser until the sale of the property is finalised. Once the sale of the property is finalised, the notice will not be effective against any portion of the funds that are to be retained by the real estate agent for payment of fees due to the real estate agent under contractual arrangements existing between the agent and the relevant debtor (as vendor of the property). The agent will only be required to remit to the Registrar any amount that would ordinarily be transferred to the relevant debtor.
The Registrar can also issue a section 72A notice to a relevant debtor's solicitor for any amounts that the solicitor may receive or that are held by the solicitor on behalf of the relevant debtor (vendor) from the proceeds of a property sale. The notice will be effective against the portion of the proceeds due to the payer (after the solicitor has distributed the sale proceeds including fees subject to a solicitor's lien or discharge of mortgage.)
Mortgage offset account
A mortgage offset account is a savings account linked to a loan account. The amount in the savings account is offset against the amount owing on the mortgage.
A section 72A notice is effective if the terms and conditions of a mortgage offset account allow the relevant debtor to access the funds held in the account and there are funds available. Before issuing the notice, the whole of the debtor's financial circumstances must be considered. The debtor must be allowed ordinary living expenses and the notice must not cause a default to occur on the debtor's regular loan repayments.
Excess funds paid onto a loan
A person, who has paid more than the minimum rate towards their mortgage or personal loan, may later redraw those extra funds. Redrawing excess funds creates a new loan from the lender to the relevant debtor. Therefore, a section 72A notice cannot be issued for those extra funds because the lender is not holding the funds for, or on behalf of, the relevant debtor.
The Registrar can issue a section 72A notice to a solicitor for funds held in trust for a relevant debtor who is that solicitor's client. The notice will not be effective against any portion of the funds that are subject to a solicitor's lien for work performed and disbursements paid on behalf of their client. A solicitor's lien creates a charge over the funds once the solicitor has delivered their bill of costs to the client (or if the client objects to the bill, when the costs are taxed) (Gilshenan & Luton v FC of T, 83 ATC 4758).
A section 72A notice may not be effective against pensions or lump sums paid by a superannuation fund or in relation to funds held. It will depend on the particular fund and the status of the money held.
Does the fund have a specific exemption from compliance?
Some superannuation funds were established by legislation which provides a specific exemption from compliance with garnishee notices.
- Superannuation Act 1976 section 118 specifically precludes garnishee action on any type of pension or other benefit under this Act (Commonwealth Superannuation Scheme pensions paid to former Commonwealth public servants).
- Defence Forces Retirement Benefit Act 1948 section 85, and Defence Forces Retirement and Death Benefits Act 1973 section 129 will not allow section 72A notices to be attached to benefits payable under these Acts.
Funds that are not specifically exempt from compliance
A superannuation fund holds superannuation money on trust for the benefit of its members (i.e. the contributors).
As a general rule a superannuation fund will be required to comply with a section 72A notice where the member has access to the funds (i.e. when the funds are 'due and payable' to the relevant debtor).
Are the benefits payable to the member?
The rules which apply to all superannuation funds when determining whether or not the benefits are actually payable to the member are as follows:
Unrestricted non-preserved amounts
If a member has access to 'unrestricted non-preserved amounts' (e.g. where they have an option of receiving an immediate payment or rolling funds over) these funds are 'due and payable'. Therefore, a section 72A notice will be effective against any superannuation funds held as an 'unrestricted non-preserved amount'. It is not necessary for the contributor to actually make a request for payment or decide whether to roll over the funds in order for the section 72A notice to be effective (CSRC Act section 72A(12)).
Where the funds are not available (preserved amounts) or other conditions are not met (restricted non-preserved amounts), a section 72A notice will not be effective. In such cases, section 72A(12) of the CSRC Act cannot overcome the legal requirement for the contributor to qualify to access those funds (e.g. by age or retirement). The notice will not be effective unless and until the debtor-member's benefits are payable to the debtor under the rules of the fund (e.g. by retirement).
Deceased member benefits
A superannuation fund holds superannuation money on trust for the benefit of its members (the beneficiary). If the member dies, the superannuation fund no longer holds the money on trust for the member. If the money is preserved it is usually paid as a death benefit to the member's dependants or legal personal representative, in accordance with superannuation law and the superannuation trust deed.
If the superannuation trustee decides to pay the death benefit to the deceased person's dependants, the beneficial ownership of the money passes to the dependants from the time of the member's death (even though the decision about the person/s to whom the money will be paid may not be made until after this date). The superannuation fund will no longer hold money for, or on account of, a relevant debtor and a section 72A notice will not be effective.
If the superannuation trustee decides to pay the death benefit to the member's legal personal representative, the superannuation becomes an asset of the deceased person's estate from the time of the member's death (even though the decision about the person/s to whom the money will be paid may not be made until after this date). The superannuation fund will no longer be holding money for, or on account of, a relevant debtor; the money is 'not due and payable' to the relevant debtor and a section 72A notice will not be effective. However, the Registrar will seek to recover any outstanding debt from the person's estate.
Military Superannuation and Benefits Scheme (MSBS) & Public Sector Superannuation (PSS) benefits administered by ComSuper
For MSBS members, the Registrar can issue a notice to collect relevant debts via employer withholding (CSRC Act section 43) or garnishee (CSRC Act section 72A), and notices under these provisions should be complied with by the trustee (Comsuper).
For PSS members, the Registrar can issue a notice to collect relevant debts via employer withholding (CSRC Act section 43) or garnishee (CSRC Act section 72A), and notices under these provisions should be complied with by the trustee (Comsuper).
However, a child support related debt or carer debt can only be collected via employer withholding if the debtor also has an ongoing child support liability (see 5.2.3)
Employer withholding of superannuation funds
If a section 72A notice can be effective against a pension paid by a superannuation fund, it may be possible to apply employer withholding as an alternative. See 5.2.3 for details.
Section 205 of the Life Insurance Act 1995 applies upon the death of an insured person. It protects money that would be payable under a life insurance policy to that person's estate preventing it from being applied to pay the insured person's debts. Without the express direction of the deceased person any order, judgment, or process of any court, executor or administrator, etc. is ineffective against the funds.
In any event, the beneficiary of a life insurance policy is often not the insured person's estate, but a nominated person, e.g. the person's spouse. When the insured person dies the funds are payable directly to the nominated person.
Income protection insurance
Income protection insurance is general insurance and not life insurance. A section 72A notice may be issued to an insurance company in respect of any money due to the relevant debtor under an income protection insurance policy.
Veterans' Affairs pensions
The Department of Veterans' Affairs cannot comply with a section 72A notice requiring it to deduct an amount from a person's Veterans' Affairs pensions, as these pensions are 'absolutely inalienable' (Veterans' Entitlements Act 1986 section 125(1)). However, a written notice may issue pursuant to section 72AC of the CSRC Act which specifically provides for deductions from veterans' pensions and allowances.
Social security payments
The SSAct and the SS(Admin)Act prevent Centrelink from withholding a parent's entitlements to a pension, allowance or benefit paid under the SSAct for the purposes of child support except where section 72AA of the CSRC Act applies.
However, section 72A notices may be served on Centrelink requiring deductions to be made from ABSTUDY payments. The Registrar has undertaken to limit deductions from ABSTUDY payments to the amount prescribed for the purposes of section 72AA.
National Disability Insurance Scheme payments
The National Disability Insurance Scheme (NDIS) provides support for people with permanent and significant disability. NDIS payments may be made to an NDIS participant, their nominee, or to a registered plan provider, to fund the purchase of supports identified in the participant's plan. These payments are not a financial resource that is available to meet a relevant debt, and the Registrar should not issue a section 72A notice to recover relevant debts from an NDIS specific bank account. This applies whether or not the participant is self-managing their supports or if the funds are being managed on behalf of an NDIS participant.
However, where a person receives payments to provide care or support for an NDIS participant, these payments are treated as employment income and a section 72A notice may be issued to the financial institution where the payments are deposited.
Inalienable benefits in a bank account
Once inalienable benefits (such as Department of Veterans' Affairs pensions or social security pensions, benefits or allowances) are deposited in an account the funds cease to be inalienable. Therefore a section 72A notice issued to a financial institution that holds money on account of a relevant debtor will be effective, provided those amounts are due and payable to the relevant debtor, regardless of the original source of those funds.
NDIS amounts are also inalienable (National Disability Insurance Scheme Act 2013 section 46A) and cease to be inalienable once deposited into a bank account. However, as noted above, the Registrar should not issue a section 72A notice to recover relevant debts from an NDIS specific bank account.
Commonwealth inscribed stock or bearer securities
Section 72A notices should not be issued to the Registrar of Inscribed Stock as the registrar is not a 'person'.
Travellers cheques, foreign currency, shares, gold
A section 72A notice cannot be effective against a third party who holds travellers cheques, foreign currency, shares or gold for a relevant debtor. This is because these things are commodities and are not 'money'.
Money held by a court
The Registrar cannot issue a section 72A notice to a court, as a court is not a 'person' (Clyne v DFC of T, 83 ATC 4007). The Registrar cannot therefore require a court to pay any amounts lodged by the relevant debtor for bail moneys, etc.
Payments to taxi drivers
The Registrar can issue a section 72A notice to a taxi owner requiring them to deduct amounts from payments they make to a contracted or employed driver. However, a section 72A notice will not be effective against a taxi cooperative from which a taxi driver hires their cab. A cooperative does not usually pay wages, fees or contract payments to a driver.
Money payable to a bankrupt
A section 72A notice issued in respect of money payable by a third party to a bankrupt person will only be effective if the amount claimed does not come within the scope of the bankrupt's estate managed by the trustee. For more information on the effect of bankruptcy, see 5.4.5.
Effect of compliance or non-compliance
Any person who pays money to the Registrar as required by a notice under section 72A is taken to be acting under the authority of the relevant debtor and is indemnified for any moneys paid to the Registrar (CSRC Act section 72A(9)).
A person who refuses or fails to comply with a notice without reasonable excuse is guilty of an offence (CSRC Act section 72A(2)) and can be prosecuted. A fine up to 10 penalty units (see 6.8.7) for penalty unit amount) can be imposed on prosecution. 'Refuses or fails' simply means that a prosecution can commence if the person did not comply with the requirement after being served (or deemed to be served in the case of postal service). The offence occurs regardless of the intention of the person.
If a person is convicted of an offence under section 72A(2) of the CSRC Act, the court may also order the person convicted to pay the amount which the person refused or failed to pay under the notice (CSRC Act section 72A(8)). This has the dual purpose of encouraging compliance and protecting the interests of the receiving parent entitled to the payment of the relevant debt.
The Registrar will credit to the relevant debtor's child support account any amount received from a third party in restitution for that third party's failure to comply with a section 72A notice. It will do so regardless of whether the third party makes this payment voluntarily, or in accordance with a court order. The Registrar will disburse to the receiving parent any amount of that restitution payment that represents unpaid relevant debts (but not late payment penalties or court costs) as if the relevant debtor paid the amount.
Requirements of a section 72A notice
The formal requirements of a section 72A notice are outlined in section 72A(3) of the CSRC Act. The notice must be in writing, and specify a day by which the payment is to be made. The due date cannot be a date before the person holds money for a relevant debtor. This is a common sense limitation on the power although the Registrar can issue a notice to a person before they hold money for the relevant debtor, the Registrar cannot require the person to pay it before they actually hold it.
A notice is valid even if, at the time it is issued, no funds are held by the third party.
Example: The Registrar may be aware that a payment is expected to be deposited into a particular bank account. A notice issued to the bank should specify a date by which the payment must be made (usually within 7 days of the money becoming due to the debtor or held for the debtor). The notice is valid until this day, even though the bank cannot comply with the notice when it is issued because the account is empty. The bank is under an obligation to monitor that account until the date for payment arrives; any deposits to the account before that date are subject to the payment order in the notice, up to a maximum notified deduction total stated in the notice.
If the Registrar wants to extend the date by which payment is to be made, the old notice should be withdrawn in writing and a new notice issued showing the new date, and an update of the amount payable if necessary.
A section 72A notice for wages or contract payments must not require deductions to the extent that they prevent the relevant debtor from meeting reasonable living expenses (Edelsten v Wilcox 88 ATC 4484). The Registrar must consider the whole of the debtor's financial position. The debtor must be allowed ordinary living expenses unless there are extraordinary circumstances.
The Registrar must give a copy of a section 72A notice to the relevant debtor (CSRC Act section 72A(5)). The Registrar will do this by posting a copy of the notice to the relevant debtor at their last known address (CSRC Act section 72A(6)).
Service of notices
The Registrar must serve the notice on the third party. The requirements for service are discussed in 6.7.
Payment made by relevant debtor
If a relevant debtor pays their relevant debt after the Registrar serves a section 72A notice upon a person, the Registrar must give immediate written notice of the payment to the person served with the notice (CSRC Act section 72A(10)).
Collection within Australia where relevant debtor is outside Australia
The Registrar can serve a section 72A notice upon a person within Australia who controls money for a relevant debtor outside Australia. However, section 72A notices are restricted in their operation and only apply to amounts already due to the Registrar.
The Registrar also can issue a notice under section 72B of the CSRC Act upon a person within Australia who controls money for a relevant debtor outside Australia. However, a section 72B notice can be used to collect current amounts of child support, before they become overdue.
A section 72B notice can be used when the relevant debtor is not physically present in Australia (CSRC Act section 72B(1)(a)) and:
- derives income, profit or capital gains from a source in Australia (CSRC Act section 72B(1)(b)(i)), or
- is a shareholder, debenture holder or depositor in a company that derives income, profit or capital gains from a source in Australia (CSRC Act section 72B(1)(b)(ii)).
If these criteria apply, the Registrar can serve a section 72B notice upon any third person who receives, controls or disposes of any of the relevant debtor's money (CSRC Act section 72B(1)(c)).
When issued a section 72B notice by the Registrar, the person must pay the relevant debt of the relevant debtor (CSRC Act 72B(1)(d)). Further, the section 72B notice may require the person to retain enough money, that comes to him or her on behalf of the relevant debtor, to pay the relevant debt or any amount that may become payable by the debtor as a child support debt.
A section 72B notice is not effective against money derived from certain natural resource payments or royalty payments (CSRC Act section 72B(4)(b)).
Like a section 72A notice, a section 72B notice must specify the amount the person is required to retain and send to the Registrar; and the due date for payment.