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The End is Nigh for Tax Refunds!

Publication date: 31 May 01 | Source: THE TAX INSTITUTE

A considerable number of Australians caught up in the BAS and IAS systems may never see an income tax refund cheque again according to President of the Taxation Institute of Australia, Ms Alice McCleary.

Many taxpayers look forward to their income tax refunds for a splurge. However, the Australian Tax Office's Running Balance Account system means that for most BAS/IAS taxpayers, the Commissioner can credit tax refunds of any sort against any other tax amount owing, even if that tax is not yet due and payable.

For example, an income tax refund can be offset against an FBT instalment which is not yet due; or a diesel fuel rebate can be swallowed up by an upcoming company tax instalment; or an exporter's GST refund can be offset against a freshly-issued income tax assessment well before the due date.

The ATO has informed the Tax Institute that it will be releasing a policy statement with regard to how it proposes to credit tax refunds and any other tax owing in relation to the RBA account.

Although this is welcome, it is all a bit too late. The problems are occurring now, and an urgent solution is required.

"The running balance account system has been a persistent annoyance for taxpayers and their advisors since its introduction in July last year," said Ms McCleary.

"The running balance system needs a complete overhaul. Tax payers who are due refunds by the ATO should be able to depend on those refunds without having them arbitrarily retained by the ATO without their knowledge, especially if no amount is due and payable at that time."

"This fiasco has inconvenienced taxpayers, added significantly to tax agents' workloads and increased the overall cost and cash flow problems of small business."