ATO finalizes discretionary pointers to withhold refunds

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The enactment of the 2019 Law Amending the Finance Law (Combating Illegal Phoenixes) earlier last year now allows the Commissioner to withhold a refund if a taxpayer has a pending declaration required by a tax law and builds on an earlier discretion, which was previously limited to pending reports under the terms of the Business Activity Statement (BAS) and the Petroleum Resource Rent Tax (PRRT).

The measure targets illicit Phoenix activity where taxpayers withhold filing tax returns leading to a tax liability but file a BAS to get a credit they would otherwise not be entitled to before taking assets out of the Strike out companies and otherwise thwart the collection of liability.

The ATO has now published the Declaration on the Administration of Justice Practice PS LA 2021/2, which sets out its administrative approach to expanding the Commission’s discretion to maintain tax refunds.

The Commissioner notes that he will consider applying this discretion only to taxpayers who have been identified as having high risk behavior, including cyclically setting up, leaving or de-registering businesses to avoid paying taxes, creditors or employee claims, or one Director associated with previous bankruptcy cases. Liquidations or deregistrations.

Poor past and present compliance with tax and pension obligations as well as receipt of a criminal complaint for directors or a tax penalty are also indicators of high risk behavior for the ATO.

Although not required by law, the PS LA notes that ATO officials are expected to provide the taxpayer with written notice of the amount withheld, the reasons for what reports they consider pending, and how the taxpayer can prevent it that refunds will be withheld in the future.

Refunds may be withheld until pending reports are submitted or until the amount has been assessed. Taxpayers can request an external review of the ATO’s discretion.

The measure complements the expansion of the Director Penalty Regime to include liabilities from goods and services tax (GST), luxury car tax (LCT) and wine equalization tax (WET).

This will allow the commissioner to gather estimates of likely GST liabilities if there is reason to believe that the taxpayer or affiliates may have been involved in Phoenix’s conduct or have mined assets with the intent to defeat creditors.

ATO finalizes discretionary guidelines to withhold refunds

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Last updated: April 27, 2021 Published: April 27, 2021

Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the premier source of breaking news, analysis and intelligence for Australian accountants.

Prior to joining the team in 2017, Jotham wrote for a number of national mastheads, including the Sydney Morning Herald and Channel NewsAsia.

You can send Jotham an email to: This email address is being protected from spam bots! JavaScript must be activated so that it can be displayed.

Jotham Lian is the editor of Accountants Daily, the premier source of breaking news, analysis and intelligence for Australian accountants.

Prior to joining the team in 2017, Jotham wrote for a number of national mastheads, including the Sydney Morning Herald and Channel NewsAsia.

You can send Jotham an email to: This email address is being protected from spam bots! JavaScript must be activated so that it can be displayed.