Tax Refunds – Accountants Beenleigh and Nerang (Plant and Associates) wish to protect their clients whilst ensuring they receive the Tax refunds they are entitled to. With a strong emphasis on educating clients, from the Gold Coast to Brisbane, they proactively write blogs, and contact clients before an issue can arise.
Tax refunds are, for many people, a sacrosanct part of the tax system. Many people just simply assume they will get a tax refund at the end of the year after they lodge their tax return. – Article by Terry Hayes
In fact, rightly or wrongly, many people and businesses rely on getting a tax or GST refund, so any delay in getting one can create problems.
While many people (and companies) will get refunds, the oft-heard cry “Where’s my tax refund?” may take on a new meaning after recent changes to the law.
The changes have provided the Tax Commissioner with a new discretion to withhold what are called “high risk” tax refunds pending refund “integrity checks” of a taxpayer’s claim. The refunds affected include income tax and/or GST and some other taxes.
I outline below how the new law works.
The new discretion is intended to allow the Commissioner to consider the correctness of the information provided by the taxpayer before refunding an amount. It is not intended that the Commissioner use this discretion to withhold a refund merely where he and the taxpayer disagree about how the law applies to the facts.
In deciding whether to withhold a refund, the Commissioner must have regard to a number of factors, including, but not limited to:
- the likely accuracy of the information provided – things like comparison to industry benchmarks, and size of refund claimed relative to the taxpayer’s turnover may be
- the impact of withholding the refund on the taxpayer’s financial position. Information relevant to this factor may include evidence of financial hardship for the taxpayer, such that it would compromise the taxpayer’s business viability. The ATO may need to evaluate the impact of a decision to withhold a refund on the taxpayer’s immediate cash flow, solvency and borrowing needs. The size of the amount claimed may also be a relevant consideration in the context of the particular taxpayer’s circumstances;
- whether withholding the refund was necessary for the protection of the revenue;
- any complexity that would be involved in verifying the information e.g. arrangements, involving multiple supply chains and multiple entities;
- the time for which the Commissioner has already retained the amount. The ATO acknowledges that undue delay in an investigation considered in the light of new information may in some cases be a factor against retaining the refund;
- It should be noted that no single factor is to be determinative and the applicability of each factor will depend on the specific circumstances of each case.
- the likelihood that there is fraud or evasion, or intentional disregard or recklessness as to the operation of a taxation law.
If the Commissioner decides to withhold a refund, he must inform the taxpayer within a short initial period (14 days for a RBA (Running Balance Account) surplus or 30 days for other credits). If the taxpayer is not informed, the amount must be paid by the day after the end of that period.
The changes will particularly affect the situation where there is an entitlement under any taxation law to the refund claimed upon lodgment of a return or other information provided by the taxpayer. This would include income tax returns for full self-assessment taxpayers (mainly companies and super funds), original or revised BASs (applying to tax periods starting before July 1, 2012), and BASs under the indirect tax self-assessment system that applies to tax periods starting on or after July 1, 2012.
Prior to the changes in the law, there was no legislative provision which allowed the Commissioner to retain a refund to check the validity of the claim, even if the Commissioner suspected it might have been incorrect.
Taxpayers can make a request under the Freedom of Information Act for documentation about the Commissioner’s decision to withhold a refund. The ATO will therefore keep a record of the reasons it has for withholding the refund.
Taxpayers can also seek a writ of mandamus against ATO staff to compel the release of a refund if an amount is withheld based on irrelevant factors, so the Commissioner is very conscious of the need for his staff to maintain complete and accurate records of the reasons for withholding any refunds.
ATO’s obligation to inform taxpayers
If the Commissioner decides to withhold a refund, he is required to inform the taxpayer:
- in the case of a running balance account surplus, by the running balance account interest day (which will generally be 14 days after giving the Commissioner the notified information);
- for other credits, within 30 days of the taxpayer giving the Commissioner a notice containing the amount claimed.