ATO tax refund: Is the ATO holding and checking your big tax refund?
If you have claimed a big tax refund from the ATO and the ATO has stopped the refund, you should contact King Lawyers immediately and get legal advice.
The ATO will notify you if it is planning to hold your tax refund
If the ATO is planning to hold a refund that you have claimed in your activity statement, the ATO will notify you within 14 days of the lodgement of your activity statement with the ATO.
If the ATO is planning to hold a refund that you have claimed in your income tax return, the ATO will notify you within 30 days of the lodgement of your income tax return with the ATO.
The ATO may stop large tax refunds
If you are claiming a large tax refund from the ATO, there is higher chance that the ATO will stop the refund and check it before the refund is paid to you.
The ATO may stop unusual tax refunds
If you are claiming an unusual or unexpected tax refund from the ATO, there is a good chance that the ATO will stop the refund and check it before the refund is paid to you. For example, it would be unusual to claim a big tax refund from the ATO if you have just started a new business and do not have much business income.
The ATO may stop tax refunds based on data matching
The ATO does data matching for known fraudulent activities. If your tax refund is considered to be high risk, it is likely that the ATO will stop it and verify the refund before any money is paid out to you.
What happens while the ATO is holding your tax refund?
If the ATO decides to hold and review your tax refund, the ATO will request more information and documents from you to confirm that have correctly claimed the refund and you are legally entitled to it.
At the same time, the ATO may also contact third parties such as banks, employers, customers and suppliers to verify your entitlement.
Once the ATO has completed its review and verified your entitlement to the tax refund claimed, the ATO will release the refund to you.
What happens is the ATO continues to hold your tax refund for more than 60 days?
If the ATO continues to hold your tax refund for more than 60 days, you may lodge a formal objection to the ATO’s decision to retain your refund.
Once you have lodged an objection, the ATO is required to decide your objection within 60 days.
Self-assessment and honesty system
The Australian tax system works on the basis of an honesty system. Accordingly, taxpayers are required to self-assess their entitlement to tax refunds and claim the correct refund from the ATO.
If a taxpayer does not understand the tax laws in Australia or is not sure how they apply, it is expected that the taxpayer will get professional legal advice on their tax affairs so that they understand the correct application of the tax laws to their personal circumstances.
Heavy penalties for incorrectly claiming tax refunds from the ATO
Although the Australian tax system works on the basis of an honesty system, there are very heavy penalties under the law for people who deliberately and systematically take advantage of this honesty system, and claim incorrect tax refunds from the ATO.
The penalties are significant. The administrative penalties are up to 90% for incorrect income tax and GST refunds claimed from the ATO. For example, if you incorrectly claim a tax refund of $10,000 from the ATO, the penalty is up to $9,000.00.
In addition to that, there are heavy criminal penalties for intentionally claiming incorrect tax refunds from the ATO. The maximum penalty for tax fraud in Australia is 10 years in jail.
Legal advice from King Lawyers on ATO tax matters
This article is offered as general information only and should not be relied on as specific legal advice on ATO tax matters.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation with our experienced tax lawyers.