Explaining Refund-Credit Offsets

Under the law it is mandatory for us to offset credit amounts against outstanding tax debts, except in limited circumstances.  The rules about offsetting also apply to debts that are subject to a payment arrangement.  We advise taxpayers of this when we are negotiating an arrangement.
When a credit has been offset, we will notify the taxpayer.  For activity statement credits, we will issue an offset advice notice and for income tax returns we will include offset details in the taxpayer’s notice of assessment.
We will first apply credits to existing debts in the tax account in which the credit originated.  Once this debt is cleared, we will apply any remaining credit to other debts in the order-of-allocation outlined in the ATO Receivables Policy.  Broadly speaking, we will first apply credits to superannuation-guarantee-charge debts and then to other debt types such as activity-statement debts.
If a taxpayer has a Centrelink or Child Support Agency debt, by law we must remit any remaining credit to those agencies.
If offsetting the credit amount will cause serious financial hardship we have the discretion to refund the credit in some circumstances.  By serious financial hardship we mean a situation where the taxpayer cannot meet the basic necessities of life.
For more information, click here to be directed to the ATO’s website.

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