August 16 - Books - Tax Accounting

Why isn’t my tax refund as big this year?

How many times can you say LMITO fast? Well, the discontinuation of it – the Low Middle Income Tax Offset – is largely to blame for the currently most commonly asked question in our inboxes: why isn’t my tax refund as big this year?

The fact that lower refunds has coincided with our cost of living crisis is rubbing some serious salt into the wound and (rightfully so) resulting in some pretty unhappy Australians. 

Here’s why your refund wasn’t what you were expecting.

The discontinuation of the low middle income tax offset

The LMITO was a temporary tax cut for Australians earning up to $126,000. In the 21/22 year, people earning between $48-90k enjoyed an additional $1500 chunk of cash in their tax returns. It was really nice while it lasted – but the tax cut ended last year. 

Good news for those earning up to $66,667 though; the low income tax offset is still in operation. Here’s what that might look like for you:

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Source: 9 News

Changes to work from home taxation

Whilst WFH very much became the norm throughout covid, the ATO pivoted (remember that word?) and allowed for an easier and more lenient way to claim related tax deductions, using an 80 cents per hour ‘shortcut method’. This has now been scrapped in lieu of the revised fix rate method, or existing actual cost method.

Here’s a calculator from the ATO which can give you an accurate indication of what your WFH deductions might look like.

In a nutshell… you guessed it. The revised measures largely mean less deductions and therefore a smaller tax return.

Obligatory debt offsetting

If you have an existing ATO debt, then they’re obligated to use any tax credits (or what would’ve been your refund) in order to pay that debt, before returning that amount as a refund. Over covid and then into this cost of living crisis, ATO debt has been very easy to accumulate. They’re no longer letting that slide and for many people, the debt will mean little to no return.

Although it may sting initially, clearing yourself of that debt is the best outcome for everyone involved. If you are experiencing financial hardship, there may be an exception for you. Call the ATO directly if this applies to you. 

Changes to income

Did you pick up a side hustle, get a second job or change careers during covid altogether? It’s easy to forget how significantly an income change can alter your return. Here’s a reminder of the current tax brackets for the 22/23 year.

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Source: ATO

As always, we do our utmost to ensure the largest tax return legally possible for our clients. If you’ve got questions about yours, get in touch. If you need to book an appointment to have your return done, you can do that here