And this year’s tax returns 

So it’s July – the traditional season for tax return requests to start flooding in at your local accountants’ offices. And this year is no different. In fact, this year, we’ve seen even more requests than usual now that all those interest rate rises have truly started to bite and people are keen to get a little bit of their hard earned back in their pockets.

But…this year, I hate to say it, you might be in for a bit of a shock when it comes to ye olde tax return lining your pockets for that much needed rego payment, or to put towards the next family holiday.

Lots of Australian tax payers hit the ATO straight out of the gate of June 30, only to have been horribly surprised to receive tax bills when they were expecting to see a return like they had in previous years.

Why is that happening?

Byebye Low & Middle Income Tax Offset – LMITO

Well, in a nutshell, it’s because the low and middle income tax offset (LMITO), introduced as a temporary measure in 2018/19 financial year (and upped again in the budget for 2021-22) for those earning between $37,000 and $126,000 was scrapped for 22/23. Which essentially means that your return is likely to be up to $1,500 lighter this year, than it was last year. Or worse, you’re likely to see an increase in tax payable by up to $1500. Ouch!

Hello Low Income Tax Offset – LITO

The only people who will be seeing any kind of tax offset in place are those earning less than $66,666. But this year, the maximum payment is $700 for those earning $37,500 or less. For those between $37,500-$45,000 it’s $700 – 5% of [your income minus $37,500]. For those earning $45,001-$66,666 it’s $325 – 1.5% of [your income minus $45,000].

To give you an idea of the difference;

Let’s say you only earned $47,500 in 2021-22 and the same in 22-23. In 2021-22 you received a likely refund of $1,462. But in 2022-23, you’re only due to receive $287.50

And if you earned $100,000 each of those years, in 2021-22 you received a $1200 offset. This year, sorry, there’s no offset coming your way.

Despite the ATO announcing these offsets were coming to an end, a lot of people have been surprised by them. My view is that for a lot of people just assumed that these tax offsets would be around forever. For we accountants, not so much. We know the government giveth and they also taketh away at various points in time. But, given everything else that’s going on in the Australian economy at the moment, the timing’s not great to take away the usual tax return refunds.

A recent survey by Finder showed that this year’s tax refund would be very important or critical to their financial health for almost a third of Australians, with 15% of people putting any funds towards their household bills. Another almost 10% will be using any tax refund to pay down their mortgage or credit card debts. There’s no doubting that a lot of people are doing it tough. And if you’re lucky enough to get a return this year, paying down debt is a good place to start, even if it’s your HECs debt..

Are there any tax upsides?

Well yes and no.  Stage 3 tax cuts beginning on 1 July 2024 will mean:

  •  If you’re a low income earner, there’s not a lot of good news. The latest tax cuts will net you only an extra $509 a year or just shy of $10 a week.
  • If you’re a middle income earner, those stage three tax cuts will net you an extra $1243 over the course of the year – about $23/wk.
  • However, if you’re earning $160K or over, you’ll win a bonus this year of nearly $5,400 or $103/wk.

Are there things to watch out for when prepping this year’s tax return?

Aside from expecting less by way of your tax return, you’ll also want to be across the changed rate for working from home. In 2021-22 the shortcut method flat rate was $0.80/hr. For 22-23 it was revised to $0.67/hr. However, you can’t double dip and claim bills on top – it’s an all inclusive rate and for some people, it might be better to work on actual expenses.

That having been said, if you’re working say three days a week from home each week for 8hrs a day (minus annual leave and public holidays), that’s around 1150hrs x $0.67/hr = $771.84 – that you might be able to claim on your tax return. Just make sure that you can support your claim for each of the days you’re claiming with records from your HR dept/manager and keep a record in your own work diary.

In summary: as research has shown in the past, having an accountant do your taxes (rather than preparing your own) is likely to be net you a better return, even if it’s less than you might have received last year. And as with all things financial/tax/business, we encourage you to seek advice from a qualified, licensed professional.

Of course, if you need good, qualified advice for you to maximise your return (or at least go some way to minimising your pain), or change up your new financial year planning, including transitioning your business to cloud accounting with Xero so you have a clearer handle on your business’ tax affairs, we’d love to help.

You can call us on 6023 1700 or connect with us via Facebook or LinkedIn.

Got a question? Get in touch

If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.

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About us:

Lloyd Accounting is a boutique accounting firm based in North Albury that operates with the sole purpose of making your tax and business affairs as easy as possible. For us, it's about really understanding what it is you're wanting to achieve and then using our experience and expertise to help facilitate that.

Please note - our new location:

Lloyd Accounting is now located at 932 Waugh Rd, North Albury, NSW.

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