The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

8.3.2.20 What fund can be attached?

Context

A section 72A notice (CSRC Act) (8.3.2.10) 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.

On this page

  • 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 & compensation payments
  • Social security payments
  • National Disability Insurance Scheme payments
  • National Redress Scheme payments
  • Territories Stolen Generations Redress Scheme payments
  • Status Resolution Support Services Program payments
  • Inalienable benefits or payments in a bank account
  • Commonwealth inscribed stock or bearer securities
  • Traveller’s cheques, foreign currency, shares, gold
  • Money held by a court
  • Payments to taxi drivers
  • Money payable to a bankrupt.

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 (Deputy Federal Commissioner of Taxation v Westpac Savings Bank Ltd (1987) 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

Under certain contractual arrangements, positive credit balances on credit card accounts can be considered to be money held by the financial institution for or on account of the cardholder and therefore recoverable under a section 72A notice. Where there is any doubt, the Registrar should request and examine the contractual arrangement to determine whether the balance is money due, or held for, the relevant debtor. This will depend on the specific contractual arrangements between the financial institution and the debtor. These arrangements vary from one financial institution to another, as does the way in which the financial institution treats any credit balance.

Term deposits

The Registrar can collect payment from a person's term deposit through 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 (that is, they are repayable upon demand) (CSRC Act section 72A(12), Macquarie Health Corp Ltd v Commissioner of Taxation (1999) FCA 1819).

Trust accounts & trust property

If a relevant debtor is a trustee of funds held in a bank account, a section 72A notice issued 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.

Partnership funds

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.

Solicitor liens

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 Federal Commissioner of Taxation (1983) ATC 4758).

Superannuation funds

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 that provides a specific exemption from compliance with garnishee (1.1.G.10) notices.

Examples:

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 Benefits 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 (that is, 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 (that is, when the funds are 'due and payable' to the relevant debtor).

Are the benefits payable to the member?

The rules that 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

Unrestricted non-preserved amounts of superannuation are benefits which the member can make an election to have paid out immediately. A section 72A notice should not be issued to the fund unless and until the member has made an election for payment. Once the election is made, the funds that have been nominated for payment will be considered 'due and payable' and a section 72A notice will be effective.

  • Other amounts

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 (for example, 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 (for example, 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 Commonwealth Superannuation Corporation (CSC)

For MSBS and PSS members, the Registrar can issue a notice to collect relevant debts via employer withholding or garnishee and notices under these provisions should be complied with by the trustee (CSC).

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 (7.4.3) as an alternative.

Life insurance

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 the insured person's estate, preventing it from being applied to pay that 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, for example, 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 & compensation payments

The Department of Veterans' Affairs cannot comply with a section 72A notice requiring it to deduct an amount from pensions paid under the Veterans' Entitlements Act 1986, as these pensions are 'absolutely inalienable' (Veterans' Entitlements Act section 125(1)). However, these payments will lose their inalienability once they are deposited into a bank account.

A section 72A notice can be issued to the Department of Veterans' Affairs in relation to compensation payments paid under the Military Rehabilitation and Compensation Act 2004 (Military Rehabilitation and Compensation Act) or the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (Safety, Rehabilitation and Compensation (Defence-related Claims) Act).

In addition, a written notice may be issued to the Department of Veterans' Affairs under section 72AC of the CSRC Act, which provides for deductions from specified veterans' pensions and allowances.

Social security payments

The SSAct and the SS(Admin)Act prevent the Secretary 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 issued to the Secretary 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.

National Redress Scheme payments

The National Redress Scheme was implemented in response to the Royal Commission into Institutional Responses to Child Sexual Abuse. A person's entitlement to a redress payment and the payment itself are inalienable, and the Registrar should not issue a section 72A notice to recover relevant debts from redress payments.

Territories Stolen Generations Redress Scheme payments

The Territories Stolen Generations Redress Scheme is a financial and wellbeing package for Stolen Generations survivors who were removed as children from their family or community in the Northern Territory or the Australian Capital Territory prior to self-government, or the Jervis Bay Territory (collectively known as the territories).

The Scheme seeks to recognise the harm and trauma experienced by Stolen Generations survivors.

A payment under the Territories Stolen Generations Redress Scheme is inalienable. The Registrar should not issue a section 72A notice to recover relevant debts from Territories Stolen Generations Redress Scheme payments.

Status Resolution Support Services Program payments

The Status Resolution Support Services (SRSS) Program provides needs-based support and assistance to eligible asylum seekers and other non-citizens as they seek to resolve their immigration status and as they transition to mainstream services in the Australian community or make preparations to depart Australia once their immigration status has been resolved. The Registrar should not issue a section 72A notice to recover relevant debts from SRSS Program payments due to the purpose of the payment and the potential financial hardship that may be caused by garnisheeing the payment.

Once a SRSS payment is deposited into a bank account, it is treated in the same way as other funds in the bank account. Therefore, a section 72A notice issued to a financial institution that holds SRSS Program payments 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.

Inalienable benefits or payments in a bank account

Benefits or payments in a bank account that cease to be inalienable

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) 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.

Payments in a bank account that remain inalienable

Payments under the National Redress Scheme and the Territories Stolen Generations Redress Scheme received by child support parents are inalienable, and remain inalienable after being paid into a bank account. A section 72A notice issued under the CSRC Act should not be issued in relation to the redress payment component of the survivor's 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'.

Traveller's cheques, foreign currency, shares, gold

A section 72A notice cannot be effective against a third party who holds traveller's 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 (1983) ATC 4007). The Registrar cannot therefore require a court to pay any amounts lodged by the relevant debtor for bail monies, 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 8.3.4.

Act reference: CSRC Act section 43 General rule of collection by automatic withholding in case of employees, section 72A Registrar may collect debts from a third person, section 72AA Deductions from social security pensions and benefits, section 72AC Deductions from veterans’ pensions and allowances, section 72B Person receiving or controlling money of a debtor who is outside Australia

CSRC Regs section 31 to section 35 Service of notices etc. 

Defence Forces Retirement Benefits Act 1948 section 85 Assignment of pensions

Defence Forces Retirement and Death Benefits Act 1973 section 129 Assignment of pensions

Life Insurance Act 1995 section 205 Protection of policy money on person’s death

Military Superannuation and Benefits Act 1991 section 45 Assignment of benefits

Military Rehabilitation and Compensation Act 2004, section 425(3) Assignment, set-off or attachment of compensation

National Disability Insurance Scheme Act 2013 section 46A Protection of NDIS amounts

Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 section 112(3) Assignment, set-off or attachment of compensation

SS(Admin)Act section 238 Payments to Commissioner of Taxation or the Child Support Registrar

Superannuation Act 1976 section 118 Assignment of benefits

Superannuation Act 1990 section 41 Assignment of benefits

Veterans' Entitlements Act 1986 section 125 Pensions etc. absolutely inalienable

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