The historical Revenue NSW debt-recovery system that was allowed to run for several years in different forms has been described as maladministration in a NSW ombud report published this week.
The state watchdog found that between March 2018 and March 2019, the NSW garnishee orders (GO) system did not comply with the state’s own laws.
Just over 40% of the state government’s funding is derived from state taxes and fines, overseen by Revenue NSW, and this money is used to pay for government and community services.
Revenue NSW (formerly the State Debt Recovery Office (SDRO)) is one government agency that has the same powers as the ATO to issue a GO, which historically was only made by courts. These orders permit the collect money directly from a third party such as a debtor’s employer or bank.
What began as an investigation into the design and use of Revenue NSW’s GO system — which has involved the use of technology since 2016 to issue high volumes of garnishee orders daily — turned into multiple findings that it did not comply with the Fines Act, and was “defective” because it did not furnish decision-makers with enough information or clearly and fully record decisions and evidence used to reach decisions.
The ombud also found that Revenue NSW was wrong when it used the GO system for the 12 months between March 2019 and 2020, because it posed an “unacceptable risk” and failed to comply with the State Debt Recovery Act.
“It has only been more recently that garnishee orders have become the more prevalent civil enforcement action where licence or registration suspension has been unavailable or unsuccessful,” ombud Paul Miller said in his report.
“By way of background, [garnish orders] … evidently constitute a highly effective and cost-efficient means of ensuring fine defaulters do not avoid paying their fines, as well as being consistent with the ‘duty … to ensure that the fine enforcement system maximises the collection of moneys due to the state’.
“However, enforcement by garnisheeing bank accounts has the potential to operate in ways that are harsher, and potentially generate greater hardship, than other civil enforcement actions.”
The NSW ombud called for Revenue NSW to work with financial institutions to prevent GOs from recovering Centrelink social security or family assistance money; to refer any non-compliance with GO protective terms to the Australian Financial Complaints Authority; and that information about GOs and how they could be challenged should be included on the Revenue NSW website.
Miller’s report also recommended that GO decision-makers be given better information, with improved processes to identify and record issues manually (as opposed to electronically); and that where there is a pending application (s 101) to write the debt off in a Revenue NSW case, it be excluded from a so-called ‘check summary report’.
In a statement on Tuesday, Finance Minister Courtney Houssos said all three ombud recommendations would be implemented.
The chief commissioner of state revenue, Scott Johnston, has also confirmed that he is committed to implementing all of the ombud’s recommendations.
“I welcome the NSW Ombudsman’s report. I have already met with him to discuss Revenue NSW’s use of garnishee orders and understand his concerns,” Houssos said of the fines recovery process under the state’s former government.
“While garnishee orders can be an important tool of last resort to recover fines and state debts, it is crucial they are implemented in a fair and equitable way.
“It’s clear that under the previous Liberal-National government that wasn’t the case,” she said.
The finance minister said work was already underway to publish information on the Revenue NSW website about GOs and better educate the public on how they work and on what grounds they can be challenged.
Changes to the GO system that have already been implemented include:
- Ensuring a minimum protected amount is left in the individual’s account.
- The introduction of a system identifying and excluding vulnerable individuals from garnishee orders.
- Improvements to the assessment of garnishee orders so Revenue NSW staff review them before they are issued.
The agency is also making improvements to the debt-recovery system to offer better protections to citizens who receive welfare payments and increased transparency of the collection of fines debt and garnishee order processes, Houssos said.
“Revenue NSW has committed to implementing his recommendations in full and already begun that work,” the minister said.
The NSW government has reassured the public that the current state debt-recovery system is compliant with the law.
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