Australia Tax Update: Treasury Moves to Close the Joint Account Garnishee Loophole

TITLE: Proposed ATO Powers Over Joint Bank Accounts: Treasury Consultation on Tax Debt Recovery

The Australian Government is consulting on proposed changes that could give the ATO new ways to recover tax debt from jointly held assets, including a joint bank account. The proposal is not law. But if adopted, it could affect taxpayers and other account holders when the ATO takes recovery action.

Understand what Treasury is proposing

Treasury released its consultation paper, Tackling fraud and financial abuse, on 14 October 2026. Submissions close on 27 November 2026.

The paper considers giving the Commissioner of Taxation power to issue a garnishee notice over a taxpayer’s presumed share of a jointly held asset. A garnishee notice is a formal direction requiring a third party, such as a bank, to pay money it holds for a taxpayer towards a tax debt.

At present, the ATO is generally unable to use garnishee notices to recover funds from jointly held assets, including joint bank accounts. Treasury says this can frustrate recovery action where joint arrangements are used to shield assets from collection.

Under one proposal, the Commissioner could presume that each individual asset holder has an equal interest. For example, if a joint asset has three holders, the taxpayer’s presumed share would be one-third of its value. That is a proposed starting assumption, not a final determination of the owners’ actual legal or beneficial interests.

As Bright Law’s David Jacobson explains in his analysis, the suggested extension would come with safeguards, but it could still have practical consequences for people who share an account or other asset with a taxpayer who owes money.

Know the safeguards, and the alternative option

The consultation paper proposes that the ATO make reasonable attempts to notify other joint owners before issuing a notice. Those owners would have an opportunity to object to the assumed equal split.

This safeguard matters. A joint account may hold money that another account holder contributed or needs for their own commitments. If the proposal proceeds, clear records of contributions and ownership could help an affected person explain why an equal division does not reflect their interest.

Treasury is also considering an alternative approach: the ATO could freeze a set amount in a joint account before notifying any account holder. Under this option, funds would be frozen rather than removed, and the ATO would not need to apply to a court first.

These are options for consultation. Treasury has not confirmed that either approach will be adopted, and the proposed powers are not currently in force. The details (including how an objection would work and how the amount to be frozen would be determined) remain subject to the consultation and any later legislative process.

See the wider fraud and financial abuse package

The joint-asset proposal is only one part of Treasury’s paper. Part 1 also seeks views on recovering tax debts in certain circumstances from tax intermediaries who commit fraud, and on pausing or waiving the debts of innocent taxpayers who are victims of tax intermediary fraud.

Part 2 addresses financial abuse across tax, superannuation, social security, family payment and child support systems. It considers ways to make perpetrators accountable for debts created through coercive control and options for relief for victim-survivors.

The broader reform work follows the Government’s response to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial abuse. In its 14 October 2026 media release, Assistant Treasurer Daniel Mulino said the Government supported or supported in principle 58 of the committee’s 61 recommendations.

As MBM Accountants’ summary notes, the measures connect to the 2026–27 Federal Budget and funding for the counter-fraud strategy introduced in the 2024–25 Budget. Together, the proposals aim to strengthen responses to fraud while addressing situations where taxpayers have been harmed by another person’s conduct.

Take practical steps while the proposal is under review

You do not need to assume that an ATO garnishee notice can currently be issued against a joint account under the proposed framework. However, this consultation is a useful prompt to organise financial records and understand how a possible tax debt could affect shared assets.

Use this checklist:

1. Keep clear ownership records. Retain statements and documents that show who contributed to a joint account or asset. This can help explain the actual interests of the owners if they are questioned.
2. Separate business and personal transactions. Use consistent records and avoid mixing funds unnecessarily. Clearer accounts make it easier to trace funds and support accurate reporting.
3. Review tax debts and lodgment obligations. Keep returns and payments up to date where possible. Prompt, accurate compliance helps reduce avoidable debt and recovery complications.
4. Respond to formal ATO communications. Do not ignore a notice or assume it applies only to one account holder. Check what action is being proposed and the response steps and timeframes stated.
5. Consider making a submission. If the proposal affects you, your business or people you support, provide feedback to Treasury before 27 November 2026.

The Australian Parliament’s House of Representatives is scheduled to sit from 26 to 29 October 2026, with Senate supplementary budget estimates taking place during the same week. The ATO and Tax Practitioners Board are scheduled to appear on 28 October. These proceedings may provide further context, but they do not replace Treasury’s consultation process.

For more Australian tax developments, read our earlier update on ATO interest relief for family trust tax liabilities.

FAQs

Can the ATO currently take money from a joint bank account for one holder’s tax debt?

The ATO is generally unable to use garnishee notices to recover tax debt from jointly held assets, including joint bank accounts. Treasury is consulting on whether to change this position. The proposed powers are not yet law.

Would the taxpayer automatically be treated as owning half of a joint account?

Not necessarily. One proposal would allow the Commissioner to presume an equal interest among individual asset holders. For three holders, the assumed share would be one-third. The proposal also includes an opportunity for other owners to object to that assumed split.

Could the ATO freeze funds before notifying joint account holders?

That is one alternative option under consideration. Treasury’s paper proposes that a set amount could be frozen, not removed, before account holders are notified and without first applying to a court. This is a proposal, not a current power under the consultation.

When does the Treasury consultation close?

Submissions on Tackling fraud and financial abuse close on 27 November 2026. You can read the paper and consultation details through Treasury’s consultation website.