The ATO Kept Your Refund: Funding the Gap When Credits Are Offset

Key takeaways

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  The Australian Taxation Office (ATO) keeps all or part of a business refund for one of four reasons: an ATO debt, missing or wrong bank details, an unlodged business activity statement, or a check of the claim.
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  When the ATO offsets your refund, it has used the refund to reduce a tax debt your business owes, so that money is usually not coming back to your business.
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  When the ATO holds a refund to check the claim, the refund may still be paid. The ATO tells you within 30 days of lodgment, and if it has not contacted you by then, it releases the refund on day 31.
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  The ATO generally keeps offsetting refunds while any debt remains on any of your business's ATO accounts, including an old debt the ATO had paused collecting, which it calls a debt on hold.
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  A short-term private loan from Secured Lending, from $250,000 and secured by property, can give your business the funds to pay the wages, supplier invoices or property settlement the kept refund was meant to cover.
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  A private loan from Secured Lending can also give your business the funds to pay its remaining ATO debts in full, where the property supports it, so the next refund is paid to your business instead of being offset.

If your business was counting on a large refund from the ATO and it did not arrive, or arrived much smaller than expected, the ATO has either used it to pay a debt or is holding it while it checks the claim. The first usually means the money is gone for good. The second usually means it is late. Either way, the wages, supplier invoices or property settlement the refund was meant to cover are still due on their dates.

We would be glad to help your business cover that gap. A short-term private loan, backed by a property your business or a director owns, is a good fit here because it can be in place quickly: we lend our own funds, our in-house team values the property, and we can settle within 24 hours. The loan funds are paid to your business, which makes the payments that are due, and your business repays us through a defined exit, such as a property sale or a refinance with its bank.

The four reasons the ATO keeps a refund

The ATO's page on why it has kept your refund (last updated 2 November 2021) lists the situations in which it keeps all or part of a refund:

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  It has applied the refund to a tax debt the business owes. This is called offsetting.
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  The business has not nominated a bank account, or the account details are wrong or incomplete.
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  One or more business activity statements have not been lodged.
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  It needs to check or verify details on the return or the BAS, and it will contact the business to do so.

The business's ATO statement of account shows which one applies. Bank details are quick to correct. For an unlodged statement, the ATO says it will not issue a refund until every activity statement due before the refund is payable has been lodged. The first and last reasons are the ones that leave a business short of cash, and they need different plans.

Offset: where the refund went

Offsetting is generally automatic. According to the ATO's page on offsetting, a credit on one account is used to pay a debt on another, and tax debts are paid before debts with other government agencies. A refund on a business activity statement can be applied to an income tax debt, or to a debt with another agency such as Services Australia. Since 1 January 2022, the same applies automatically between a business's goods and services tax branches and pay as you go withholding branches. The ATO notifies the business of each offset.

Old debts count. The ATO's page on debts on hold (last updated 15 May 2026) explains that a debt it paused collecting years ago is still legally payable, and that the law requires it to use refunds and credits to reduce it. A goods and services tax credit can be used against an income tax debt on hold. The ATO is now including debts on hold in account balances, and 6 months after a debt is included, the general interest charge starts to apply to it.

A payment plan does not protect a refund either. The ATO's payment plans page says refunds and credits are used to reduce the debt, and that this does not replace the instalment that is due. Keep paying each instalment on its date, because a plan that defaults makes the full overdue balance payable at once, as our article on an ATO payment plan that has defaulted explains.

The ATO can choose to refund rather than offset in only four situations, set out in its practice statement on offsetting refunds and credits: the debt is due but not yet payable, the debt is on a payment plan the business is keeping to, the ATO has agreed to defer recovery, or the debt is a director penalty. The same statement says most payment plans expressly allow offsetting. Your accountant or BAS agent can ask the ATO to pay the refund instead, even after an offset has happened. We are a lender, and we do not give tax advice.

Held for checking: when the refund arrives

A refund held for checking may still be payable, so the money may be late rather than lost. The ATO's page on checking refunds (last updated 27 February 2026) says it processes more than 98% of refund claims without further action. Those it stops include a significantly large refund and a small business claiming a large refund for the first time.

The ATO's own example is a building company that bought a $1.3 million property in the September 2018 quarter and claimed a refund of $180,000, compared with $30,000 the quarter before. The ATO asked the tax agent for the property contract, the tax invoice for the purchase and the three largest supplier invoices, confirmed most of the claim and released the refund.

The timing rules on the same page are the ones to plan around:

We will inform you within 30 days of lodgment of your activity statement if we have retained your refund for verification purposes.

If the ATO does not contact the business in that time, it releases the refund on day 31. It pays interest on legitimate refunds it holds for more than 14 days. If it is still holding the refund 60 days after the first 30, the business can object, and that period is extended by the time the business takes to provide information the ATO asks for. A large refund can therefore be held for 90 days or more, and the ATO says a prompt reply helps it finish sooner.

How a private loan covers the payment the refund was for

The payment the refund was meant for does not move because the ATO kept the money. A short-term private loan gives your business the funds to make it on its date.

If the refund was offset

The refund has already reduced an ATO debt, so usually nothing will come back from the ATO. The loan pays the wages, the supplier invoices or the settlement now, and your business repays us from a separate, defined source, such as the sale of a property or a refinance with its bank. If payday is the pressure, our page on an urgent short term loan for payroll sets out how we fund wages.

The same loan can also give the business the funds to pay every remaining ATO debt in full, including a debt on hold. Your accountant confirms the balance on each account before the loan amount is set.

If the refund is being held for checking

The refund may still come, but the payment it was meant for cannot wait for the ATO's check. The loan makes that payment now. Loan terms run from 1 to 24 months, and how your business repays us is agreed before settlement. Where the refund came from goods and services tax on a commercial purchase, our page on short term finance for the goods and services tax on a commercial property purchase explains how we fund that tax at settlement.

The loan terms

We lend against the property. The refund is never the security for the loan.

How to stop the next refund being taken

Offsetting applies while any debt remains on any of the business's ATO accounts, including a debt on hold. Check the statement of account before lodging the next business activity statement, keep every statement lodged, and pay every overdue account in full. Once each account reads nil and no debt on hold remains, the next refund is paid to the business rather than applied to an ATO debt.

Frequently asked questions

Can the ATO take my refund for a debt it put on hold years ago?

Yes. The ATO uses refunds and credits to reduce a debt on hold, and it says the law requires it. A goods and services tax credit can be applied to an income tax debt on hold.

We are on an ATO payment plan. Can the ATO still take our refund?

Yes. Keeping to a plan is one of the four situations in which the ATO may refund rather than offset, but it is a choice for the ATO, and its guidance says most plans allow offsetting. The offset does not replace the next instalment, so keep paying the plan on its dates.

Can I borrow against property to cover a refund the ATO kept?

Yes. Your company is the borrower, and property owned by the company or a director can back the loan. The loan funds are paid to your company, which makes the payment the refund was meant for.

How Secured Lending Can Help

We would be glad to help your business make the payment the refund was meant for, on its date. Our loan gives your business the funds to pay the wages, suppliers or settlement now, and to pay its remaining ATO debts in full where the property supports it, so the next refund is paid to your business rather than offset against an ATO debt. Your business then repays us through a defined exit, such as the sale of a property or a refinance with its bank.

A private loan suits this problem because the dates are fixed and the loan can be in place before them. In most cases we decide in hours, we issue a letter of offer as soon as terms are agreed, and we can settle within 24 hours. We provide short-term loans backed by real property. If you would like us to look at your situation, it helps to have these to hand:

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  The ATO statement of account showing the offset, or the ATO's letter about checking the refund.
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  What the refund was meant to pay, and the date it is due.
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  The property that could back the loan, its estimated value and any existing loan on it.
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  How your business plans to repay the loan, and roughly when.

You are welcome to call us on 1300 795 175 to talk it through, or send the details through and we will come back to you.

Gino Tabila

Associate Director

Mark Hutchins

Managing Director