For the past couple of financial years, low and middle-income earners have enjoyed a beefed-up tax refund thanks to the Low Middle Income Tax Offset (LMITO) or 'lamington'.
That's now ended and some Aussies might have a sour surprise when they get their tax refund this year.
“The demise of the low and middle income tax offset means that low-to-middle income earners may see their tax refunds from July 2023 reduced by between $675 and $1,500,” Mark Chapman, Director of Tax Communications at H&R Block, told Savings.com.au.
The maximum amount was previously available for those earning up to $90,000, and wound-down if they earned more than $126,000.
Mr Chapman has flagged numerous ways in which Australians could attempt to make up some of the difference.
1. Claim all you’re entitled to
“If you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it,” Mr Chapman said.
It’s easy to overlook purchases like work-related clothing and uniforms when lodging claims, but doing so could see you paying more tax that you need to.
If you work from home, you can also claim a 67-cent per hour fixed rate to cover such things as energy, internet, and phone costs. Though, if you claim the fixed rate, you can’t claim separately for included expenses.
Those who work from home can also use the actual-cost method, which requires more administration but could yield a higher expense claim.
2. Don’t overclaim deductions
“Don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent,” Mr Chapman said.
Doing so could prove costly.
“If your deduction claims are found to be incorrect, you will be required to repay the tax avoided, plus pay interest,” he said.
“If the ATO believes that you have acted carelessly, a penalty of between 25% and 95% of the tax avoided may also be charged.”
3. Don’t rely on data from the ATO
Many of us are faced with a plethora of pre-filled income information when logging on to fill out their tax information.
But that information might not be correct or complete.
“Some people assume that because the data comes from the ATO, it must be right,” Mr Chapman said.
“That’s a dangerous assumption, especially in July and early August.”
4. Update your details
Plenty of tax returns each year get delayed due to inconsistencies relating to a person’s name, address, or bank details, Mr Chapman said.
So take the time to proofread all the information you’re handing over.
If you’ve moved houses or changed your name recently, be sure to register the change with the ATO.
5. Keep receipts
The fifth tip harks back to the second: Make sure you can prove the expenses you’re deducting.
That means keeping a hold of your receipts.
If that sounds cumbersome, make digital copies.
The ATO's 'MyDeductions' app feature allows you to capture and store receipts digitally.
6. Reach out for help
Finally, don’t be afraid to reach out to a professional if it all seems too much.
“Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties,” Mr Chapman said.
An experienced professional might also be better positioned to hunt down the more obscure deductions on your behalf, especially if you don't have a simple tax scenario.
And to top it all off, a tax agent's fee is also deductible for the following financial year.
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Picture by Hunters Race on Unsplash.