How we recover debts at tax time

Sometimes we’ll use your tax refund to reduce the amount you owe, even if you already have a payment arrangement in place.

Legally, we have to recover money that’s owed to us. Understanding how we recover debts at tax time can help you plan ahead.

We can use your tax refund to repay your debt at tax time if you:

  • get Family Tax Benefit (FTB) or Child Care Subsidy (CCS). This is part of balancing family assistance payments
  • are a former customer and you’re not making any repayments on your debt. This is known as a tax refund garnishee
  • have an overdue Child Support debt.

Balancing family assistance payments

We’ll check for overpayments or existing Centrelink debts when we balance your FTB and CCS.

We’ll recover any overpayments or existing debt amounts you have before paying you any top ups, supplements or lump sums.

This can include existing debts for income support payments. We do this even if you have a payment arrangement in place.

If you still have a debt after available supplements or top ups have been paid, we can use your tax refund to recover the outstanding amount. We call this process offsetting.

Read more about understanding your FTB balancing outcome.

Read more about understanding your CCS balancing outcome.

Overdue child support debts

We can use a tax refund to pay any outstanding child or spousal support amounts.

Read more about recovering child and spousal support payments.

Tax refund garnishee

This is different to the yearly balancing process for current family assistance customers.

We can use your tax refund to repay your debt if you’re not getting a payment from us, and you haven’t made an arrangement to repay your debt.

We won’t do this if you have asked us to pause your repayments.

If we do take money from your tax refund to pay a debt, we’ll send you a letter to explain it. It’ll also appear on your Notice of Assessment from the Australian Taxation Office.

Read more about action we take if you haven’t started repaying your debt.

Why we recover debts from FTB top ups, supplements, lump sums and tax refunds

We deliver payments on behalf of the Australian Government, according to policy and legislation. The policies and legislation also determine how we must raise and recover debts.

FTB and CCS are paid under family assistance law. The legislation is set out in the Family Assistance Act 1999, and the Family Assistance (Administration) Act 1999.

Income support payments are paid under social security law. The legislation is set out in the Social Security Act 1991, and the Social Security (Administration) Act 1999.

Both sets of legislation have different rules about how we need to raise and recover debts.

You can read more about policies for FTB and CCS debts in Section 7 of the Family Assistance Guide.

You can read more about policies for income support payment debts in Section 6 of the Social Security Guide.

When we won’t recover your debt at tax time

We won’t recover debts from your FTB top ups, supplements, lump sums or tax refund if your debt repayments are paused due to a disaster or emergency event or a pending formal review.

Page last updated: 28 September 2023.
QC 65348