When Does the ATO Hold a Refund?
From 1 January 2025, the ATO has the authority to hold refunds for up to 90 days where the ATO doesn’t have your financial institution details (FID). Currently, it applies to:
- Income tax refunds
- Fringe Benefits Tax refunds.
If the ATO holds your refund, they will contact you to update your FID to get your refund by electronic fund transfer (EFT). The ATO will get in touch with you by sending:
- a letter to your tax professional using Online Services for agents (so, make sure you have a professional tax return accountant)
- a message in myGov
- an email
- a letter.
When you update your FID, you will receive a refund via EFT. EFT payments are more secure and faster than cheques. If your details are not updated within 90 days, your refund will issue as a cheque. If your refund is deposited into the bank account of your registered tax professional, you’ll need to ensure their details are also up-to-date. The ATO will only use these account details for refund deposits and ATO-held super. The ATO doesn’t use them for direct debits.
Refunds can be retained when they are checked
The processing time for most tax returns lodged online will be 2 weeks; some may take longer to process if additional verification is required. If you are a full self-assessment taxpayer (such as a superannuation fund or company, but not a partnership or sole trader lodging individual tax returns), the ATO may hold your income tax refund for details verification on your tax return. This ensures the refund amount has been claimed accurately.
To complete this verification, the ATO may request the records you used to prepare your tax return. Offering the requested information will help the ATO to process your refund more quickly. If your refund is retained, you can object to the ATO’s decision. The objection time period starts 90 days after you file your tax return and ends after receiving an amended assessment. If the ATO asks you to provide additional information, the ATO will extend the objection period for the time you take.
For further information, you can reach out to the best tax accountant who specialises in handling tax affairs. You can also search for a tax accountant near your office for an in-person meeting by searching online for ‘tax accountants near me’.
How Does the ATO Pay Your BAS Refund?
If you have an Australian Business Number (ABN), the ATO will pay refunds into your nominated financial institution account. Typically, this account must be at an Australian branch and held either:
- in your business, company, or trading name (this can also be retained jointly with another business or individual)
- by a registered tax agent.
Your financial institution may provide real-time payment services. However, although the ATO is working towards improving available payment options, currently:
- They can’t pay using a PayID
- Refunds from the ATO won’t be real-time.
Why Your Tax Return May Be Delayed
Most online tax returns take around 2 weeks of processing time, but some can take longer. This may occur if:
- You try to lodge your tax return again after already sending it.
- You make changes before your original return is finished processing.
- You lodge returns for multiple years at the same time.
- You are dealing with insolvency.
- Your bank account details are not accurate.
- The ATO needs to verify details in your return.
- The ATO needs to confirm information with other government agencies, especially if you owe money.
- You have unpaid or unresolved tax debts.
- You have a tax debt that was on hold previously.
If your tax return is delayed, the ATO or your tax agent will contact you. Manual processing can take up to 30 days, and calling won’t speed it up. However, if you’re facing serious financial hardship, you may be able to request faster processing—but you’ll need to provide proof.
Conclusion
The blog shares what can impact your ATO refund processing time. To avoid making wrong tax return lodgments, you can reach out to Reliable Melbourne Accountants, ensuring every tax matter is handled properly.