If you’re expecting a tax refund, but you owe Centrelink money, beware: they might use your refund to repay your debt.
Services Australia, the body in charge of Centrelink, has reminded Australians that it has the power to recover money owed to it.
And it does this by using your tax refund to reduce the amount you owe.
The warning comes as a surprise to many, but it’s not a new policy. According to Services Australia, “If you have a debt with us at tax time, we may use your tax refund to repay it.”
When Will Centrelink Use Your Tax Refund?
Centrelink will use your tax refund to repay your debt if you’re not making regular repayments or don’t have a repayment arrangement in place.
This applies to people who receive Family Tax Benefit or Child Care Subsidy, former customers who aren’t paying off their debt, or those with overdue Child Support debts.
However, if your debt repayments have been paused due to a disaster or emergency event, or you’re waiting for a formal review, Centrelink won’t use your tax refund to recover debts.
How Does It Work?
Centrelink checks for overpayments or existing debts when balancing Family Tax Benefit and Child Care Subsidy payments. They start balancing Family Tax Benefit in July and Child Care Subsidy in mid-August.
If you owe money, Centrelink will recover the debt before paying out any top-ups, supplements, or lump sums.
For child support debts, they’ll use your tax refund to pay off the outstanding amount directly.
Former Centrelink recipients who haven’t made a repayment arrangement will receive a letter if money is taken from their tax refund.
The amount will also appear on their Notice of Assessment from the ATO as a ‘Credit Offset to Centrelink’.
If you’re worried about hardship, contact Centrelink’s Child Support enquiry line before lodging your tax return.