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When you become bankrupt, you have some obligations when it comes to your tax returns - just as you did prior to bankruptcy.
You must inform your trustee when you receive a tax return. If your trustee is the Official Trustee, you can use the below online form to let us know if you have received an ATO Notice of Assessment.
Can I keep my tax refund?
It depends on your circumstances. You must inform your trustee when you receive your tax refund. You also need to provide a copy of your ATO Notice of Assessment. It's important to not spend your tax refund until your trustee makes an assessment and informs you if they have a claim in the refund.
Your trustee calculates the following and notifies you of the outcome:
- Refunds for income you earn before you enter bankruptcy are assets your trustee can claim.
- Refunds for income you earn after you enter bankruptcy form part of your assessable income for compulsory payments. If your assessable income exceeds a set amount you may need to make compulsory payments. For more information about compulsory payments during bankruptcy see Income and employment.
You still need to lodge your tax returns as your obligations to the ATO remain during bankruptcy.
Can the ATO keep my refunds during bankruptcy?
Yes, but only if you owe a debt to them or another Commonwealth agency e.g. Child Support or Family Assistance. They will use the tax refund to go towards what you owe.
The ATO can withhold your tax refunds even if you list these debts in your bankruptcy. For further queries contact the Australian Taxation Office.