While we process more than 98% of refund claims without any problem, every year we select a small proportion of BAS refunds to check the accuracy of the information provided. To ensure refund claims are correct, we verify information provided on the BAS against information on our systems and may contact other parties such as banks, employers, customers and suppliers.
Why we check refunds
We may stop to check your refund based on:
- the size of the refund being claimed
- the value of the refund concerning previous activity statement lodgments
- changes in circumstances or behaviour
- data matching for known fraud activities.
We use sophisticated analytical techniques to select high-risk refunds.
Examples that may lead to a refund being stopped for review include (but are not limited to):
- a small business claiming a large refund for the first time
- a significantly large refund
- a refund that is inconsistent with previous claiming patterns of the business
- businesses that claim an accumulation of small refunds over time
- if we have concerns around the ability of a business to support its acquisitions based on reported income and cash flow
- if there are indications of identity takeover, for example, if we
- suspect the refund may be going to the bank account of another party without the client's knowledge
- have intelligence that the identity has been stolen or is linked to other fraudulent activity.
Records and details we need
Keeping relevant supporting documentation will speed up the refund process if we need to contact you.
For example, if your refund is larger than normal, there are probably one or two transactions that are the difference between receiving an unusually large refund or having to pay a net amount to us as you have done previously. A one-off purchase of a motor vehicle is an example.
The ATO auditor needs to check things like:
- whether the actual amount is accurate
- that the GST credit was claimed in the right period
- where your income is low, the source from which you obtained funding
That's why we ask for a copy of the tax invoice, your accounts transaction listing and a copy of the bank transaction or other proof of payment showing where the money came from.
The information we request may differ on the circumstances, but it is usually specific information about the transactions that led to you claiming the refund.
Example: Claiming a large refund for the first time
ABC Pty Ltd operates in the vehicle smash repair industry. It recently registered for GST to establish a new workshop. In setting up the business, ABC Pty Ltd paid $330,000 (including GST) to fit out the workshop and to purchase equipment.
The start-up costs resulted in a large refund claim of $30,000 in the September 2018 quarterly Business Activity Statement (BAS). This was the first large refund claim by ABC Pty Ltd. The $30,000 refund was identified for review and we contacted ABC Pty Ltd to provide the following information as part of the verification process:
- details on the nature of the business activity and what has caused the refund
- the tax invoice for the equipment as this makes up the majority of the refund claimed
- bank statements to evidence adequate funding and payment for the purchase of the equipment.
We and ABC Pty Ltd agreed on seven days to provide this information, and ABC Pty Ltd provided it within this timeframe.
We contacted the equipment supplier to confirm the tax invoice was issued and had been paid in full. The ATO confirmed the existence of an enterprise and substantiated the refund. We released the refund without any further action.
Example: Refund is significantly different to the immediate prior period
ABC Pty Ltd is a building and construction company involved in residential property development projects. In the September 2018 quarter, ABC Pty Ltd purchased a property for $1.3 million. Non-capital acquisitions increased from $300,000 in the previous quarter to $680,000.
These events led to an unusually large refund claim of $180,000 in the September 2018 BAS. In the previous quarter, ABC Pty Ltd claimed a refund of $30,000.
We identified the $180,000 refund for review and contacted the authorised tax agent to provide the following information as part of the verification process:
- details on the nature of the business activity to understand why the refund had increased from the previous quarter
- details on the development including construction costs and when sales were expected
- the tax invoice for the purchase of the $1.3 million property and three of the highest valued tax invoices from different suppliers to support other purchases
- a copy of the contract for the purchase of the property.
The tax agent for ABC Pty Ltd sent the information to the ATO.
We contacted the vendor of the lot and the other suppliers to confirm they issued the tax invoices. They also contacted the bank to confirm the finance agreement. The ATO confirmed the existence of an enterprise and substantiated the majority of the refund claim. They released the refund without any further action.
End of exampleRefunds can be retained while they are checked
If we need to verify some details on your activity statement or tax return, we may retain your:
- activity statement refund
- income tax refund if you are a full self-assessment taxpayer (such as a company or superannuation fund but not individuals).
We verify that the amount of your activity statement or income tax refund has been correctly claimed.
We will inform you either:
- within 14 days of lodgment of your activity statement
- within 30 days of lodgment of your tax return if we have retained your refund for verification purposes.
If we do not inform you within this period, we will issue your refund and may conduct verification later.
We may need to see records you used to prepare your activity statement or tax return. Responding promptly will help us to process this more quickly.
If we continue to retain your refund 60 days after the 14-day or 30-day period, you may object to our decision to retain your refund. If we request information from you during this time, the period before which you may object is extended by the number of days it takes you to provide all the information we request from you.
If you're expecting a business activity statement (BAS) refund as a credit, there are circumstances when there could be a delay or offset against a tax debt.