Many Australians are finding significantly lower tax refunds on their 2023 taxation lodgement with many also finding taxation debts for the first time. 

What is the reason for these sudden debts and what is your next step?
  • Low and Middle Income Tax Offset (LMITO). The LMITO was a tax offset that provided up to $1,500 in relief to taxpayers earning between $48,000 and $90,000. The offset ended on 30 June 2022, therefore taxpayers who were previously enjoying this break found a sudden stop to it.
  • Inflation. Inflation has been rising in Australia in recent months, which means that the cost of living has also been increasing. This can be a factor around the dropping of the LMITO in an attempt to curb spending, when the cost of living is going up the pain of not having the refund that tax payers were accustomed to has been felt hard around Australia.
  • Increased Income. Some taxpayers may have had an increase in income in the 2022-2023 financial year, which could push them into a higher tax bracket. This means that they will have to pay more tax on their overall income.
  • HELP Loan Payments. Inflation adjusted pay-rises could lead to pushing Australian taxpayers into the next bracket for their HELP loan repayments. If the withholding for your HELP was lower in the first half of the year, then your withholding may not cover an additional half a percent that the bracket may have increased by. 
  • Multiple Employers. When working multiple jobs simultaneously it is important that you are not having the tax-free election claimed on both. This will result in your employers withholding less tax from salary & Wages when your effective tax rate may be higher. This can also be an issue when receiving lump sum payouts from a previous employer. 

If you are facing a tax debt or believe you may have one this year, it is important to speak to a tax agent. When lodging through a tax agent you could be able to delay when your 2023 taxation is due for lodgement and payment. The ATO can offer several payment options, including payment plans and instalment arrangements. You can also contact the ATO for financial hardship assistance if you are struggling to pay your debt.

Some tips to help you avoid tax debts in the future:
  • Make sure you understand your tax obligations.
  • Ensure your employer/HR is aware of any outstanding HELP loans.
  • If you are working multiple jobs, ensure that the tax free election is only claimed on one of them. 
  • Estimate your tax liability throughout the year and pay instalments as required.
  • Get professional help if you are unsure about anything.

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