The tax refund many Australians expect has dramatically reduced. The ATO has made some changes that may affect your tax refund. It may be vastly lower than you think, or you may receive a tax bill! This could be for numerous reasons, including:

  • The Low and Middle Income Tax Offset (LIMTO) has ended
  • Your credit or refund has been offset
  • Your income has changed from previous years
  • The ATO’s data matching system detects differences in your declared income and the income information they receive through pre-filled data
  • You have not advised your employer of a study or training support loan and you earned more income than the minimum threshold

The primary reason you have a low refund or even a tax bill could be due to the discontinuation of the Low and Middle Income Tax Offset (LMITO).

Introduced in 2018/19 budget, the LMITO gave 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, and those earning between $48,001 and $90,000 during the 2021/22 financial year got the full $1,500 offset.

This is the first time in several years this offset has not been available to taxpayers and it will make a difference of between $675 and $1500 to many tax returns. So, if you have a discrepancy of about $1,500 in your 22/23 return refund, the missing LMITO could be the cause.

Work from home deductions

Another significant change that will be felt by many taxpayers this year is a shift in the way deductions can be claimed by anyone working from home.

The main change is that you can no longer use the 80c-per-hour “shortcut” method (that was temporarily introduced in 2020) or the old 52c per hour fixed rate and must instead use either the revised fixed rate method or the actual cost method to calculate deductions.

The actual cost method remains the same, but the fixed rate method has changed to 67 cents per hour for each hour you work from home for a specific list of expenses (that is different to the old fixed rate) that includes electricity and gas usage, phone usage (mobile and home), internet usage, stationary, and computer consumables.

It’s worth noting that you can’t claim any addition deductions for these expenses if you use this method. For example, you can’t claim a separate deduction for using your mobile phone for work purposes as well as at home if you’re using the fixed rate method. Instead, you’ll have to choose the actual cost method.

Taxpayers must keep a complete record of all the hours they work from home with timesheets or a diary covering the period from 1 July 2022 to 28 February 2023. Taxpayers who don’t keep sufficient records from 1 March 2023 will not be able to claim the revised fixed rate.

Compulsory Payments

Repayments for your study and training support loan are automatically deducted through the income tax system, eliminating the need for you to provide loan information in your tax return. If you have an outstanding loan at the time of lodging your tax return and your repayment income exceeds the minimum repayment threshold, the ATO will calculate your compulsory repayment and include it in your notice of assessment.

This applies even if your tax return covers a period prior to your commencement of studies. The rate of your compulsory repayment increases in proportion to your income. As your earnings rise, so does your repayment amount. Your compulsory repayment is solely based on your individual income and is not influenced by the income of your parents or spouse.

However, if you have a spouse or dependents and your family income is low, you may be exempt from making compulsory repayments if you meet the following criteria:

  • You are eligible for a reduction of the Medicare levy due to low family income.
  • You are not required to pay the Medicare levy.

The repayment thresholds and rates are updated annually for the compulsory repayment of:

  • Higher Education Loan Program (HELP)
  • VET Student Loan (VSL)
  • Student Financial Supplement Scheme (SFSS)
  • Student Start-up Loan (SSL)
  • ABSTUDY Student Start-up Loan (ABSTUDY SSL)
  • Trade Support Loan (TSL).

Other factors

In addition to these complicated new rules, don’t forget there are also several other factors that are not new but could also impact your bottom line at tax time and are worth remembering. Many people have picked up extra work in recent times, ranging from an additional part-time gig to freelance work or other side hustles.

This could include work like driving for Uber or doing deliveries, renting out your spare room on Airbnb or picking up some casual shifts on the weekend – and they all need to be included in your tax return and could impact your final refund amount.

Also don’t forget that if you don’t currently have private health insurance, you might be required to pay a Medicare levy surcharge as part of your tax return. Plus, any outstanding student or government debts you might have could impact your final refund amount.

Finally, one of the most common mistakes many people make when lodging their tax return is failing to claim tax deductions to which they are entitled. It’s easy to leave money on the table unnecessarily if you don’t know all the possible deductions you could be claiming, so it really pays to have expert advice at tax time from someone who knows what they’re doing.

How can we help? if you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email –  or arrange a time for a meeting so we can discuss your requirements in more detail.

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