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  • We check your refund

    While more than 98% of refund claims are processed without any problem, every year we select a small proportion of BAS refunds to check the accuracy of the information provided. To ensure refund claims are correct, we verify information provided on the BAS against information on our systems and may contact other parties such as banks, employers, customers and suppliers.

    On this page:

    Why we check your refund

    We may stop to check a refund based on:

    • the size of the refund being claimed
    • the value of the refund in relation to previous activity statement lodgments
    • changes in circumstances or behaviour, and/or
    • data matching for known fraud activities

    Sophisticated analytical techniques are used to select high risk refunds. Examples that may lead to a refund being stopped for review include (but are not limited to):

    • a small business claiming a large refund for the first time
    • a refund that is significantly large
    • a refund that is inconsistent with previous claiming patterns of the business
    • businesses that claim an accumulation of small refunds over time
    • if we have concerns around the ability of a business to support its acquisitions based on reported income and cash flow
    • if there are indications of identity takeover. For instance, if we suspect the refund may be going to the bank account of another party without the client's knowledge, or where we have intelligence that the identity has been stolen or is linked to other fraudulent activity

    Records and details we need

    Keeping relevant supporting documentation will speed up the refund process should we need to contact you.

    For example, if your refund is larger than normal, there is probably one or two transactions that are the difference between receiving a large refund which is unusual or having to pay a net amount to us as you have done previously. A one-off purchase of a motor vehicle is an example.

    The auditor needs to check things like:

    • whether the actual amount is accurate
    • that the GST credit was claimed in the right period
    • where your income is low, the source from which you obtained funding.

    That's why we ask for a copy of the tax invoice, your accounts transaction listing and a copy of the bank transaction or other proof of payment showing where the money came from.

    The information we request may differ on the circumstances, but is usually specific information about those transactions that are the reason the refund has been claimed.

    Examples of the verification process

    The below examples provide the specific information we ask for when we check a refund.

    Example 1: Claiming a large refund for the first time

    ABC Pty Ltd operates in the vehicle smash repair industry. It recently registered for GST to establish a new workshop. In setting up the business, ABC Pty Ltd paid $330,000 (including GST) to fit out the workshop and to purchase equipment.

    The start-up costs resulted in a large refund claim of $30,000 in the September 2016 quarterly Business Activity Statement (BAS). This was the first large refund claim by ABC Pty Ltd. The $30,000 refund was identified for review and ABC Pty Ltd was contacted to provide the following information as part of the verification process:

    • details on the nature of the business activity and what has caused the refund
    • the tax invoice for the equipment as this makes up the majority of the refund claimed, and
    • bank statement(s) to evidence adequate funding and payment for the purchase of the equipment.

    ABC Pty Ltd was given a timeframe of 7 days to provide this information, to which they agreed.

    The supplier of the equipment was contacted to confirm the tax invoice was issued and had been paid for in full. The information that was provided confirmed the existence of an enterprise and substantiated the majority of the refund. The refund was released without any further action.

    Example 2: Refund is significantly different to the immediate prior period:

    ABC Pty Ltd is a building and construction company involved in residential property development projects. In the September 2016 quarter ABC Pty Ltd purchased a high valued property for $1.3 million. Non-capital acquisitions increased from $300,000 in the previous quarter to $680,000.

    These events led to an unusually large refund claim of $180,000 in the September 2016 Business Activity Statement (BAS). In the previous June 2016 quarter, ABC Pty Ltd claimed a refund of $30,000.

    The $180,000 refund was identified for review and the authorised tax agent was contacted to provide the following information as part of the verification process:

    • details on the nature of the business activity to understand why the refund had increased from the previous quarter
    • details on the development including construction costs and when sales were expected
    • the tax invoice for the purchase of the $1.3 million property and three of the highest valued tax invoices from different suppliers to support other purchases
    • a copy of the contract for the purchase of the property.

    The tax agent for ABC Pty Ltd was able to get the client to provide the information the next day and send it to the ATO.

    The vendor of the lot and the other suppliers were contacted to confirm the tax invoices were issued. The bank was also contacted to confirm the finance agreement. The information that was provided confirmed the existence of an enterprise and substantiated the majority of the refund claim. The refund was released without any further action.

    End of example

    Refunds can be retained while they are checked

    If we need to verify some details on your activity statement or income tax return we may retain your:

    • activity statement refund
    • your income tax refund if you are a full self-assessment taxpayer (such as a company or superannuation fund but not individuals),

    The aim of these checks is to verify that the amount of your activity statement or income tax refund has been correctly claimed.

    We will inform you either:

    • within 14 days of lodgment of your activity statement
    • within 30 days of lodgment of your income tax return if we have retained your refund for verification purposes.

    If we do not inform you within this period, we will issue your refund and may conduct verification later.

    We may need to see records you used to prepare your activity statement or income tax return. Responding promptly will help us to process this more quickly.

    If we continue to retain your refund 60 days after the 14-day or 30-day period, you may object to our decision to retain your refund. If we request information from you during this 60-day period, the period before which you may object is extended by the number of days it takes you to provide all information we request from you.

      Last modified: 18 Apr 2017QC 18637