We maintain different accounts for various taxes, including income tax, activity statement amounts, and fringe benefits tax. Accordingly, many business taxpayers have a range of different accounts in relation to their various tax obligations. These obligations require separate tax returns or activity statements, and separate payments. Generally, where one of your accounts is in credit - that is, 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 for a number of reasons, including:

  • having an outstanding debt with us for another type of tax – for example, your activity statement refund may be offset against an income tax debt that you owe
  • having an outstanding debt to another Australian Government department or agency which has required us to pay any refund to them to cover other debts – for example, the Child Support Agency or Centrelink.

In certain circumstances, we have a limited discretion not to offset amounts. This discretion not to offset includes where the amount owing is one of the following:

  • due but not yet payable
  • subject to a payment arrangement and you are complying with that arrangement
  • an amount to which we have agreed to defer legal recovery proceedings.

Where a debt is due but not yet payable we will usually apply all, or part of your refund to reduce those debts. However, where you can show that retaining your refund will cause you financial hardship, we may refund the full amount of the credit to you.

Small amounts

Generally, we will not offset where either your credit available for offset, or the tax debt that you owe is a small amount - it's usually not cost-effective for you, or for us, to do so. However, there are some situations where we have no choice and we will offset small amounts.

We will offset small amounts where:

  • the credit entitlement and tax debt are located within the same account – for example, credit entitlements and debts notified on an activity statement will be offset against each other
  • the credit entitlement and debt relate to the same tax type – for example, an income tax credit will be offset against an income tax debt
  • the debt you owe relates to the superannuation guarantee charge
  • we have commenced legal action against you to recover a tax debt
  • the Child Support Agency requires your credit to pay a child support debt.

We may also offset small amounts from time to time when we undertake bulk account maintenance to clean up our accounts.

Receiving notification

We will issue a notification to you detailing the nature of the offset. Where the refund is used to offset an amount owed to another Australian Government department or agency they will also notify you that we have paid an amount on your behalf.

See also:

Voluntary payments

We use the term 'voluntary payment' to describe the situation when you make a payment to us in anticipation of a tax debt that you will owe in the future. Generally, although these payments may place your tax account into credit, we will not (and are not required to under subsection 8AAZLF(2) of the TAA) refund this amount to you unless you ask us to.

Example 1

Julie makes a payment in anticipation of her income tax liability before the required lodgment date of her annual income tax return. This payment will temporarily place Julie's income tax account into credit. If Julie finds that she needs that money, she will need to ask us to refund it. Provided her income tax liability has not become due for payment, and she doesn't have any other tax debts, we will refund the voluntary payment.

End of example

In other circumstances, if we process your income tax return (from which you are expecting a refund) between when we process your activity statement and when we receive and process your payment for that activity statement debt, we may offset your income tax refund against your activity statement debt (under section 8AAZL of the TAA). In this instance, you will need to ask us to refund the credit balance on your activity statement account if you want the payment to be returned to you (under subsection 8AAZLF(2) of the TAA).

Example 2

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 subsequently lodges his income tax return expecting a refund of $1,000. When Barry's return is processed 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 (the day we processed his income tax return) we would 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. The payment of $2,500 will place his activity statement account into credit for $1,000. Because Barry paid this money to us, we will consider it to be a voluntary payment and it will not be refunded automatically. 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

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

See also:

Incorrect or incomplete bank account details

Under section 8AAZLH of the TAA, we are required to pay your activity statement refunds (including your goods and services tax refunds) into your nominated financial institution account, unless there is a good reason to refund the amount in a different way.

This means that we will usually retain your activity statement refunds until you have provided us with your financial institution account details. We will also retain these refunds if your nominated financial institution account details are incorrect or incomplete.

A financial institution account will be considered incorrect if it is held in the incorrect name.

The following table outlines, for particular entity types, examples of accounts which would be considered to be held in correct or incorrect names:

Entity type

Accepted accounts

Incorrect accounts


the company

trading name

director name/s


the partnership, that is, all of the partners

executor for the partnership

an individual partner

Individual (sole trader)

the individual sole trader

trading name

the sole trader and another individual

another individual


the trust

the trustee in their capacity as trustee.

Beneficiary or beneficiaries names

Where we require bank account details for the payment of the refund, we will send you a letter asking you to provide these details. Generally, once we have the correct financial institution details your refund will be automatically issued to you.

Ensure you quote your account details correctly when you apply for your Australian business number, or when you update your account details.

In limited circumstances, where you have made a request, we may pay an activity statement refund to you in a different way. For example, we will pay an activity statement refund by cheque where you hold religious beliefs that preclude the operation of a bank account. We may also pay an activity statement refund into a third party bank account that you have nominated, where the third party has a close legal relationship with you.

See also:

Outstanding activity statements

Under paragraph 8AAZLG(1)(b) of the TAA, we will not issue your refund if you have not lodged all your activity statements that were due prior to the refund being payable. For example, if you are required to lodge your activity statements monthly, we will not give you a refund arising from your June activity statement if you have not lodged your May activity statement.

The best way to have your refund released is to lodge your outstanding activity statements. However, we may release your refund in certain circumstances where you have outstanding activity statements if you can show us that the retaining of the refund will cause you serious financial hardship, or significantly impact on the viability of your business.

See also:

Verification or checking purposes

Under paragraph 8AAZLGA(1)(a) of the TAA, we may retain your activity statement refund or, if you are a full self-assessment taxpayer for income tax purposes (such as a company or superannuation fund but not individuals), your income tax refund if we need to verify some details on your activity statement or income tax return. 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 within 14 days of lodgment of your activity statement or 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. Your timely response will help us to process the activity statement or income tax return.

If we continue to retain your refund 60 days after the 14-day or 30-day period, you may object 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: 21 Jun 2016QC 18637