Unexpected lower-than-normal Tax Refunds

Posted at 13:05h in News, Tax by Simmons Livingstone

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According to recent Australian Taxation Office (ATO) figures, the average tax refund has plummeted by over $580 this year. This decline is attributed to various factors, including the discontinuation of the low and middle-income tax offset (LMITO) and revised rules regarding work-from-home (WFH) expenses.

The LMITO, which previously provided eligible individuals earning up to $126,000 a tax offset of up to $1,500 came to an end earlier this year. This change alone has contributed to smaller refunds for many taxpayers, especially those with incomes below the specified threshold.

Additionally, revised rules concerning WFH expenses have introduced stricter record-keeping requirements. As of March, the ATO mandates meticulous documentation of actual hours worked to claim deductions. The short-cut method, introduced during the pandemic, was abolished for the financial year 2023, further complicating the process for some taxpayers.

The combined impact of these changes has led to a significant reduction in the total payouts, totalling $5.4 billion less than the previous year. Last year, 10.2 million taxpayers received a total of $23.6 billion, averaging $2,314 per individual. In contrast, this year’s 10.5 million taxpayers received a total of $18.2 billion, averaging $1,733 per individual.

It’s important to acknowledge that the revised WFH rules may not have been widely understood by many taxpayers, potentially leading to overlooked claims and, consequently, decreased refunds. The requirement for strict record-keeping of actual hours worked from March caught some individuals off guard, as the change was introduced at the beginning of the year when many were not focused on their tax affairs.

While these changes present challenges, they also offer an opportunity for strategic financial planning.

SLA is here to assist you in understanding and adapting to these changes effectively. Please reach out to us with any questions or concerns regarding your tax situation. Contact us on 1800 618 800 or via email at admin@simmonslivingstone.com.au.