Why is your tax refund so low?

There has been plenty of chatter about lower-than-normal tax refunds this financial year. According to the ATO, there are a few reasons your return refund doesn’t look as good as normal.

The low and middle-income tax offset (LMITO)

The most likely reason for a low refund or a tax bill is the discontinuation of the low and middle-income tax offset (LMITO).

The LMITO was introduced in the 2018/19 budget, giving those earning between $37,000 and $126,000 a tax benefit of up to $1,080 depending on how much they earned. The offset increased during the 2021/22 financial year, and those earning between $48,001 and $90,000 received the full $1,500 offset. The bad news is that LMITO no longer applies, so you may notice a difference of approximately $1,500 in your 22/23 return refund. 

Additional income streams

With the increasing cost of living, many Aussies have been taking on additional work over the past financial year. This may include freelance work, casual shifts or other side hustles to help keep up with rising costs. You may also receive additional income through renting out your home on Airbnb. This additional income will need to be included in your tax return and could impact your return. 

Working from home changes

Changes to deductions that can be claimed by anyone working from home may also impact your tax return this year. Taxpayers are no longer able to use the 80 cents-per-hour shortcut method or the 52 cents-per-hour fixed rate.

The actual cost method remains the same, however, the fixed rate method has changed to 67 cents per hour for every hour worked at home for specific expenses including electricity, gas, phone usage, internet, stationary and computer usage. It is also important that you keep a record of all the hours you work from home with a timesheet, as those who don’t have records of their hours (from March 2023) will not be able to claim the fixed rate.

Medicare Levy

If you don’t currently have private health insurance, you may be required to pay a Medicare levy surcharge which will also impact your tax return. If your income exceeds $90,001, and you do not have private patient hospital cover for the full year, you will need to pay the surcharge.

How can you improve your tax return next year?

If you are completing your tax return without the support of an Accountant, you should always do your research to ensure that you aren’t missing any smaller deductions such as the depreciation of home office equipment or computer expenses. 

The best way to better your chances of a healthy tax refund is to work with an Accountant who will be able to support you in making sure you are claiming every possible deduction and maximising your refund. 

Speak to the team at APS Tax & Accounting.

Written by APS Senior Accountant, Stephen Fry. 

Stephen is an accountant with over 13 years of professional expertise in the areas of taxation and accounting. Currently serving as a senior tax accountant at APS Tax, Stephen offers comprehensive guidance and ensures compliance in all tax-related matters. He has developed a specialised focus in areas such as self-managed superannuation funds, cryptocurrency taxation and leveraging software and technology to assist clients in streamlining their processes. Beyond his professional pursuits, Stephen cherishes quality time with his family and enjoys unwinding on the golf course. On the weekends he also enjoys following the AFL and watching British comedy television.