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  • BAS refund

    After we have processed your business activity statement (BAS), either:

    • you will owe money (a tax debt), or
    • we will owe you money (a refund).

    Occasionally, you may not receive your refund or the refund you receive may be less than you expected.

    The word 'credit' on this page refers to both a credit and a running balance account surplus (e.g. on your integrated client account).

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    Why we have kept your refund

    There are situations when we are entitled to retain part of, or all your refund.

    • We may apply part, or all, of your refund against a tax debt that you owe us – this is known as offsetting.
    • We may firstly offset your credit against your tax debt, and then also receive a payment from you for that same tax debt. As a result, your account may be placed in credit. The payment you made is treated as a voluntary payment in anticipation of a tax debt, which we generally don't automatically refund.
    • We will keep your refund if you haven't nominated a bank account for us to pay your refund into, or the bank account details you provided are incorrect or incomplete.
    • We will keep your refund if you have not lodged one or more of your BAS.
    • We can keep your refund because we need to check or verify details shown on your return or BAS. In these circumstances, we will contact you.

    See also

    Offsetting

    On this page

    Using a credit or refund for an outstanding debt

    Offsetting is where we use a credit from one account to pay off a debt on another account. The account may be with us or another government agency. Generally, offsetting is automatic, and we offset credits against tax debts before debts with other government agencies.

    Many business taxpayers have a range of different accounts for their various tax obligations. Generally, if we owe you money, we are required to refund that amount to you. You may, however, receive a reduced refund or no refund at all because you have an outstanding debt with:

    • us for another type of tax – for example, we may offset your BAS refund against your income tax debt
    • us for previously non-pursued debts – for example, we are required to offset credits to reduce outstanding tax debts (except in certain circumstances), including debts we previously put on hold
    • another government department – for example, we may offset your BAS refund against a debt you have with Services Australia.

    We will usually apply all or part of your refund to reduce the debt. In certain circumstances, we don't have to offset amounts including when the amount owing is:

    • due but not yet payable  
    • subject to a payment arrangement and you are complying with that arrangement
    • an amount we have agreed to defer recovery action on, and
    • debts which relate to director penalties.

    If any of the above situations applies to you, we may refund the full or partial amount if it is appropriate to do so. However, we encourage you to contact us before or at the time of lodging your BAS or your income tax return if you think one of the above situations apply to you.

    Notifying you

    We will notify you about your offset. If we use your refund to offset an amount owed to another government department or agency, they will also notify you that we have paid an amount on your behalf.

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    See also

    Offsetting for GST branches and PAYG withholding branches

    The following information will help you understand how offsetting operates for GST branches and pay as you go (PAYG) withholding branches.

    When an entity registers a branch for GST or PAYG withholding purposes, the entity is called the 'parent entity'.

    Each branch has a separate integrated client account distinct from the parent entity's integrated client account. An integrated client account may also be referred to as a branch or business activity statement account.

    From 1 January 2022, automatic offsetting will apply to all GST branches and PAYG withholding branches. If there is a credit on an integrated client account, it will automatically be used to reduce a debt firstly on other integrated client accounts of the parent entity.

    We will then use remaining credits on any integrated client account and apply them against debts on the other accounts of the parent entity, such as fringe benefits tax and income tax accounts.

    Any amounts offset to other accounts will appear on the relevant statement of account.

    Example 1: Offsetting for GST branches and PAYG withholding branches

    Sam owns a coffee shop franchise which he runs with his wife (the parent entity). Sam also owns a coffee shop franchise managed by his daughter, Abby and he owns another franchise managed by his son, Joe.

    Each franchise has a separate accounting system, but they are all owned by Sam with the same tax file number (TFN) and Australian business number (ABN). Sam chooses to register the franchises as branches.

    Sam and each branch lodges a BAS. As a result:

    • Sam has a $22,000 amount refundable (credit)
    • Abby's branch has a $2,000 amount payable (debt), which remains unpaid
    • Joe's branch has a $1,000 amount payable (debt), which remains unpaid.

    The branches are part of the same parent entity and offsetting between the accounts will occur when a credit in one account is available to offset against a debt in another account.

    The credit on Sam's account is offset against the outstanding debts in the branch accounts of Abby and Joe. Sam receives a $19,000 refund for the coffee shop he runs with his wife, and the branch accounts of Abby and Joe have a $0 balance.

    If the branches relating to the franchises run by Abby and Joe had paid all amounts due before the offsetting occurred, Sam would have been refunded $22,000.

    End of example

    See also

    Offsetting for GST joint ventures

    The following information will help you understand how offsetting will operate for GST joint ventures.

    From 1 January 2022, automatic offsetting will apply to all GST joint ventures. If an entity is a GST joint venture operator, credits on any of the entity's accounts will be automatically offset against tax debts on any of their other accounts. This includes GST joint venture accounts and the entity's own integrated client account, fringe benefits tax and income tax accounts.

    If you are the operator of multiple joint ventures, we will use credits on one joint venture account to offset against tax debts on another joint venture account.

    The amount refundable to a participant of a GST joint venture will not be offset against another participant's tax debts. Also, a credit of a participant (who is not the operator) of a GST joint venture will not be automatically offset against a tax debt on the operator's GST joint venture account.

    Any amounts offset to other accounts will appear on the relevant statement of account.

    Example 2: Offsetting for GST joint ventures

    An operator and two participants form a GST joint venture. Both the operator and participants are not members of any other GST joint venture.

    The operator now has two reporting responsibilities:

    • their own accounts
    • a separate account for reporting obligations for the joint venture.

    BAS lodgments are made, and as a result:

    • the joint venture operator has a $750,000 amount refundable (credit) on its GST joint venture account
    • the operator also has a $150,000 amount payable (debt) on its own integrated client account which remains unpaid
    • the first participant has a $50,000 amount payable (debt) on its income tax account which remains unpaid
    • the second participant has a $100,000 amount refundable (credit) on its own integrated client account.

    The $150,000 tax debt owed by the operator is automatically reduced when the $750,000 credit in the operator's GST joint venture account is applied against the debt.

    The remaining amount of $600,000 is refunded to the operator. The operator now has a $0 balance. The first participant still has an outstanding debt of $50,000.

    If credits weren't available on the GST joint venture account, the second participant's credit of $100,000 would not have been automatically offset against the operator's tax debt. It also won't be applied against the first participant's tax debt.

    End of example

    Voluntary payments

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    Making an early payment

    We use the term 'voluntary payment' to describe situations where you make a payment to us in anticipation of a tax debt that you will owe in the future. Generally, we will not refund this amount to you unless you ask.

    Example: Payment in anticipation of tax debt

    Julie makes a payment in anticipation of her income tax liability before the required lodgment date of her annual tax return. This payment will temporarily place Julie's income tax account into credit.

    Julie finds she needs that money, so she asks the ATO to refund it. As her income tax liability has not become due for payment, and she doesn't have any other tax debts, we decide to refund the voluntary payment.

    End of example

    Income tax refund and activity statement debt

    If you have an income tax refund and an activity statement debt, we may offset it if events occur in the following order:

    • we process your activity statement and you have a debt
    • we process your tax return and you are due for a refund
    • we have not yet received your payment for the activity statement debt.

    Example: Offset and voluntary payment

    Barry lodges his fourth quarter business activity statement. It is processed on 7 July and results in a tax debt on Barry's activity statement account for $2,500. This amount is not due to be paid until 28 July.

    Barry then lodges his tax return expecting a refund of $1,000. When we process Barry's return on 24 July, we record a credit of $1,000 on Barry's income tax account and issue a notice of assessment to him.

    As Barry has not paid his activity statement account debit by 24 July, we offset Barry's income tax credit of $1,000 against the $2,500 debt on his activity statement account, even though his activity statement debt is not yet due for payment.

    The income tax notice of assessment provides details of this offset. This means Barry will not receive the $1,000 income tax refund he was expecting.

    While waiting for his income tax refund, Barry sends a payment of $2,500 on 25 July to pay his activity statement debt. However, Barry's activity statement debt has already been reduced by $1,000 after we offset his income tax refund against the debt. The payment of $2,500 will place his activity statement account into credit for $1,000. Given Barry paid the amount to us, we consider it to be a voluntary payment in anticipation of a future liability and will not automatically refund it. Generally, we will keep this amount as a credit on Barry's activity statement account unless he asks for it to be returned.

    End of example

    Small credit balances

    We may refund small credit balances, including some voluntary payments, when we undertake bulk account maintenance to clean up our accounts.

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    See also

    • PS LA 2011/22 Refunds of running balance account surpluses and credits - Commissioner's discretion to retain refunds and the discretion to pay refunds in a different way
    • Taxation Administration Act 1953 Part IIB - Running balance accounts, application of payments and credits, and related matters (section 8AAZL)
    • Taxation Administration Act 1953 Part IIB - Running balance accounts, application of payments and credits, and related matters (section 8AAZLF)
      Last modified: 02 Nov 2021QC 18637