The ATO is planning to make getting your tax refund by EFT compulsory from the 2014 tax year, where a refund is expected.
So individuals lodging using e-tax or lodging electronically through an agent (i.e. not by paper) will be required to enter details of a bank account to receive the tax refund. Below are a few questions you might have about the ATO’s refund process.
Why should I enter my bank details?
I prefer receiving a cheque...
Why? Is it so you can go to the bank and wait 5 days for the money to be available? If you use your bank details, you will get the money earlier. A week later you will receive an assessment showing what your refund is made up of.
Any reason I should enter my bank details if I don’t think I am due a refund?
If you pay PAYG instalments or are in business, you may be due a refund from your integrated client account.
How will the ATO make bank details compulsory if I lodge a paper tax return?
The ATO may make bank details a compulsory field. I believe the ATO will eventually try to minimise paper tax returns as much as possible. The ATO are already pushing tax agents to minimise paper returns.
What if the bank account is incorrect?
What if I close my account and forget to tell the ATO?
Currently a closed account will result in a cheque refund.
What if the incorrect account details (e.g. a typo) is entered on the account
The ATO check the account name against the number, if there is a different name they will pay a cheque because the name would be different.
Note that the account number is most important and the name is only used as a guide – so just because you couldn’t fit all the characters into the account name field, you should still receive your refund by EFT.
What if I forget to change the account and the bank refund goes to my ex-husband?
The ATO will pay the refund to the requested account. Make sure you check the bank details before lodging your tax return.
What if there is a fraudulent bank account on my return (or if a tax return is lodged fraudulently on my behalf)?
Unless they detect fraud, the ATO will pay the refund to the fraudulent bank account.
Are there any risks with giving my bank details to the ATO?
Can I trust the ATO with my bank details?
The ATO have strict security, however there is always a risk giving your bank details to anybody. However, even in a security breach (very unlikely) you would likely receive reimbursement from the ATO.
Will the ATO take money out of my account (garnish) if they know my bank details?
It is possible, the ATO have the power to garnish your bank account and take a percentage of the balance of the account. However, I have mainly seen this occurring for companies rather than individuals, and only for taxpayers who have ignored payment demands and have constantly broken payment arrangements with the ATO.
Although, I believe the ATO could garnish your account regardless of you provide your bank details on your tax return for refund.
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Scott Kay is an accountant, tax agent and the founder of NoMoney. Scott's goal is to help people approach their finances from a new perspective and improve their financial situation. For tips about money, investing, tax and everything in between visit NoMoney, or like NoMoney on Facebook.