What expenses qualify for a hardship refund?
Yes — certain hardship expenses may qualify you for a tax refund if you can demonstrate genuine financial hardship and the expenses were directly related to your circumstances.
When the Australian Taxation Office (ATO) considers a hardship refund, they assess whether paying your tax debt would cause serious hardship. Here is what typically qualifies.
What the ATO Classifies as Hardship Expenses
The ATO uses specific criteria to determine genuine financial hardship. Qualifying expenses generally fall into three categories: essential living expenses, essential medical costs, and essential repair or replacement of major assets.
Essential Living Expenses
These include basic necessities such as:
- Food, groceries, and household supplies — typically up to $800 per month for a single person, $1,600 for a family of four
- Rent or mortgage payments on your primary residence
- Utility bills: electricity, gas, water — averaging $200–$400 per month
- Essential medical expenses not covered by Medicare or private health insurance
- School fees and essential education costs for dependent children
- Essential transport costs if required for employment
Medical and Health-Related Costs
Uncovered medical expenses can support a hardship claim, including:
- Dental treatment — major procedures can exceed $5,000
- Psychiatric or psychological counselling sessions — typically $150–$280 per session
- Prescription medications not covered by the PBS safety net threshold
- Medical equipment or aids for disability or chronic illness
- Ambulance and emergency services costs
Essential Asset Repair or Replacement
If a major asset (such as a vehicle used for work, or medical equipment) requires urgent repair or replacement to maintain your income or health, the ATO may consider these costs. Examples include:
- Car repairs essential for commuting to work — typically $500–$3,000
- Medical device replacement — cost varies by device type
- Essential household appliance breakdown requiring immediate replacement
What Does NOT Qualify
Non-essential expenses are excluded from hardship assessments. These include:
- Credit card debts or personal loans used for discretionary spending
- Entertainment, holidays, or lifestyle expenses
- Investment property costs beyond primary residence
- Gambling losses
- Business expenses for self-employed individuals (separate arrangements apply)
How to Apply for a Hardship Refund
To request a hardship refund or payment arrangement with the ATO:
- Gather documentation: bank statements, payslips, receipts for all essential expenses
- Complete ATO’s hardship application form (available via myGov or by contacting the ATO directly)
- Provide a detailed statement of your financial position including assets, liabilities, income, and expenses
- Submit to the ATO in writing — they typically respond within 28 days
The ATO may contact you to discuss repayment options if they determine you cannot pay in full. In genuine hardship cases, they may release you from the debt or accept an offer of compromise.
Key Thresholds and Data
Based on ATO guidelines and cost-of-living benchmarks for 2024–2025:
- Basic living expenses allowance: approximately $800–$1,000 per fortnight for a single adult
- Family hardship threshold: varies based on number of dependents and location
- Medical expense threshold: expenses exceeding 10% of your taxable income may be considered significant
- Minimum debt for compromise: typically cases above $100 are considered, though smaller debts may be written off in extreme circumstances
When to Seek Professional Help
If your tax debt exceeds $5,000 or you are unsure whether your expenses qualify, consult a registered tax agent or financial counsellor. The ATO’s Internal Audit and Debt Review process can take 6–12 weeks, so early application is recommended to avoid further penalties and interest charges.
