The decision was made in Edinburgh this morning by appeal judges, who ruled Ms McGarry had been the victim of a miscarriage of justice.
The ruling comes despite the ex-MP originally pleading guilty to the charges.
The 38-year-old had her conviction quashed in an appeal heard by Lord Carloway, Lord Turnbull and Lord Drummong Young.
A retrial has been ordered.
A contempt order has been put in place that blocks the reporting of details of how Ms McGarry suffered a miscarriage of justice.
The former SNP Glasgow East MP was jailed for 18 months in June for embezzling £25,000 from pro-independence groups.
At the time Ms McGarry was freed on bail after lodging an appeal.
The 38-year-old was elected as an SNP member in 2015, but did not seek re-election in 2017.