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20 Aug 10 More on refunds

MEMBER 266 writes:

"Having read the multitude of tax agent complaints about delays in issuing refunds, coupled with our firm’s experiences, I'm now starting to fully understand the machinations of the ATO's New Super Computer. Essentially what we as Agents and our clients need to understand is this - if you are due for a refund, you need to wait for us the ATO to check with every other government, and semi government department to see if you owe them any money. If you do, your refund will be snaffled to pay that debt. Whether it’s your income tax account, your ICA, RBA, FBT, PAYG Withholding, Centrelink, Family Assistance Office, Child Support, Victims of Crime, Register of Births Deaths and Marriages, ASIC, unpaid tolls, unpaid speeding fines. You name it, your refund will be snaffled to pay it.

If you think that I'm joking, this is what happened to two of our clients:

  1. John was due for a $5,000 refund on his June 2009 return. He is a director of many companies and one of the companies is the trustee of a Unit Trust. That UT has a balance of $6,000 owing on their ICA. Despite the fact that the UT has a payment arrangement in place with the ATO, they snaffled his personal refund and offset it against the ICA of the UT. His return was lodged on 8 June 2010, but the "effective date" for the refund was suspiciously 1 July 2010. The only notification we saw was "Refund offset against ICA balance". No letter of explanation, nothing, it took the ATO 22 days to get back to us to let us know that it was offset against the ICA of the UT.
  2. David was in a de facto relationship with Rachel for a few years. In 2006, Rachel was involved in a car accident and needed to be taken by ambulance to the hospital. She didn’t have the appropriate level of health cover and was sent a bill by the Ambulance people. Rachel never paid the bill and subsequently, David and Rachel separated. David lodged his June 2009 return recently and $500 was mysteriously withheld. You guessed it - when he rang the ATO they told him the $500 had been withheld to pay for Rachel’s outstanding unpaid amount owing to the Ambulance people.
The mess this is going to create is nothing short of horrific, refunds due to partners of partnerships are going to be snaffled to pay for amounts owing on the partnership ICA. And on unpaid Super Guarantee amounts. Refunds due to directors of companies are going to be snaffled if the director controls that company and the company owes money, anywhere. The ATO will collect this money on its new principle of "possession is nine tenths of the law, you fight it out amongst yourselves".

Imagine the hours Tax Agents are going to spend chasing this information up, the phone calls, the letters, the objections. Most will be unbillable. Clients will be furious, many will leave the Tax Agent to go to another obviously more competent agent. Goodwill in tax practices will be destroyed. Imagine the tax agent that relies on their fees being paid from the refund. It will change the way we do business demanding payment up front from clients (which in all honesty is not a bad thing anyway, but it’s going to be a massive change for some).

The message in all of this is don't expect your refund. I have no doubt you'll be next. Got any unpaid parking tickets??"

MEMBER 267 writes:

"It seems that the ATO has changed process in auditing GST refunds which is going to have serious ramifications for some taxpayers.

I have a number of property developers who set up special purpose entities to run each of their developments. Each special purpose entity lodges monthly to get the GST back as a lot of banks will only fund the GST component of the development on a monthly cycle.

Prior to 30th June we routinely had GST audits on refunds (especially at start up period) and these were handled within 14- 21 days by the ATO without much disruption to client operations.

In July one of our clients entities hadn't received a refund and we started chasing the May refund on the 9th July and were told it was going to be audited. On the 22nd July they sent a questionnaire and request for certain information which we duly sent them on the 27th July.

On the 6th August we rang and they hadn't even begun reviewing the information and were told that the audit would be complete within 110 days.

Not so bad if they were only holding up the May refund but June has been lodged and we have just lodged July and heading for $100k in refunds. The taxpayer’s bankers are telling them to cover the shortfall. The problem is magnified by the fact they have 3 other projects going with at least one other in audit process as well.

I don’t understand what previously took less than a month can now take up to 3 months (although they are ringing all client suppliers and verifying supply).

I have complained and got a case officer but was told it could take up to 110 days again. So I have rung tax agent complaints and was told on Tuesday that I would get a call back within 72 hours, right now nothing.

The real complaint is about process as it will affect a lot of taxpayers."

MEMBER 268 writes

"I would like to make this a little frivolous.

Hi Kids

Just to let you know that the ATO computer system is working well.

I deal with motor vehicle dealers & there was a GST case that resulted in refunds in 2008. A dealer this week received around $150K into his bank account which was a double up of an amount paid in 2008. Speaking to the ATO it took a little convincing that the money was in the bank, then after consulting with other staff the officer came back advising the taxpayer should give the money back to which I agreed but what if we were charged interest to which he replied ‘It would only take a phone call & it would be no problem’  Ho-hum, where have I heard that line before?

Seems that the error occurred when processing the quarterly adjustments over the period of time when in fact the refund had been processed in the June 2008 BAS in accordance with the ATO’s directive at that time. Seems that the new process is to provide for objection limits. One wonders if I am alone in having a dealer client awash with government funds. The officer’s reply was ‘I hope so’.

The object of bringing this incident to your attention is that perhaps the quantum may jolt anyone from the ATO that deigns to read our publication, out of the self congratulatory purple haze they surround themselves in & deal with the problems we are dealing with on an ever increasing basis. But then, $150K of government funds pales to insignificance when compared to a mere mortal’s refund being greater than $2,000.

As for the politicians, those in the safe seats feel they are answerable to no one, those in the marginals are ignored by their peers so no one of that group are going to help. I went to a meeting where it was reported by the presenter that the Joint Party Committee set up to bring into being legislation that will affect us all, accompanied by Treasury people at the sitting, did not know what it took to become an accountant or what was required to maintain the status.

Seems the lunatics are running the asylum!!"

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