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19 Mar 10 More on ATO refunds

MEMBER 57 writes:

"Some time ago I lodged an individual return for a client and he was entitled to a refund of more than $5,000. When the assessment issued (one of those lovely, sensible, old style ones) it showed the refund but noted that it had been snaffled to pay another outstanding debt with the ATO.
 
I rang the ATO for an explanation but they would not talk to me about it because I was only the tax agent for the individual - I was told that the client would know what the debt was for. I rang the client but he did not have a clue so he then rang the ATO and was advised that the debt was owed by the company he worked for. He is also a shareholder and director of this company. The company is not the usual mum and dad company but one with several individual and/or company shareholders. The company had entered into an arrangement to pay outstanding money and had kept to this arrangement so there were no arrears.
Is the ATO entitled to take an individual's personal tax refund to offset against the debt of a company in which this individual is involved?  Surely the company is a separate legal entity and arrangements had already been made to pay off the debt.
 
Can the ATO simply help themselves to anyone's refund if they so choose?"

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