Tuesday, June 25, 2024
HomeFinanceAustralians anticipate receiving $1500 less in tax refunds this year.

Australians anticipate receiving $1500 less in tax refunds this year.

Some Australians will receive less in tax refunds this year as a result of the ATO’s new crackdowns and the expiration of the Low to Middle Income Tax Offset.

In 2023, will my tax return be lower?

As depicted below, prior to the end of the Low to Middle Income Tax Offset on June 30, 2022, Australians who earned up to $126,000 annually received an offset on their tax returns. However, since the offset is no longer available, taxpayers who were previously eligible for it may now see their tax refunds reduced by up to $1500.

The LMITO’s operation:

Taxable income of less than $37,000: $675 offset Taxable income of more than $37,001: Taxable income of $48,001 to $90,000: $675 offset plus 7.5 cents for every dollar above $37,000, up to $1,500 in total $90,001 to $126,000 in taxable income For each dollar beyond $90,000, the offset of $1,500 is reduced by three cents. Paul Feeney, the founder of the financial advice app Otivo, stated that “ultimately, more people will find that they have fewer tax returns resulting from the offsetsandso forth that the government had in place.”

The best way to utilize your tax refund:

Mr. Feeney cautioned that while there are “many things that people can deduct,” “there’s a fine line between what you can and can’t.”
He suggested that you check the ATO’s Deductions You Can Claim page to make sure that the things you are deducting are legal, such as the cost of your tax agent or education that is related to your job.

In my tax return, what will the ATO be looking for?

According to accountant Coco Hou, the ATO is concentrating this year on cryptocurrency transactions, rental property deductions, and claims for business-related expenses.

The Australian Taxation Office (ATO) places a particular emphasis on excessive or unsubstantiated claims, such as personal expenses disguised as expenses related to work. Therefore, it is crucially important for taxpayers to maintain accurate records and only claim legitimate expenses related to their employment.

Ms. Hou noted that rental property deductions can “get tricky” in the event of Australia’s floods in 2022. “Many taxpaying citizens own rental units that require maintenance… The ATO is focusing on areas where excessive interest deductions and inaccurate expense allocations, particularly those related to repairs and maintenance, occur.

Therefore, if the roof was blown off and you replaced it, that may be the deductible; however, if you say, “Hey, I want to change a whole new roof,” that is not deductible; instead, you must capitalize the expense and claim depreciation over it.

The accountant adds that taxpayers should exercise extreme “carefulness” when dealing with the third focus area, cryptocurrencies.

The capital gain and loss must be properly tracked whenever a cryptocurrency is purchased, sold, or exchanged.
What about the debt indexation for HECS/HELP?

Numerous Australians with student debt have considered making voluntary repayments in order to pay off their debt more quickly in light of the increased HECS/HELP debt indexing that will take effect on June 1, 2023.

While Ms. Hou advised paying off debt “as early as possible” if cash flow permits, Mr. Feeney, a financial advisor, believes “it’s a lot to start paying off (HECS debt) quickly.”

Some people who have money but don’t need it for other things should look into paying it off.

“However, in general, I advise continuing to return it with pre-tax government monies. since you’ll have to pay it back after taxes if you don’t.

And I have no doubt that saving that money for oneself as a reserve rather than paying the HECS is probably a wiser course of action, and I have no doubt that with the financial living costs and the pressures that people are under right now,”

How are tax refunds spent by Australians?

Ms. Hou asserted that she “can definitely see the state of conservatism already come into the picture” due to the fact that even taxpayers who have cash on hand are spending less.

Simply because they are still concerned about the possibility of interest rates rising. They also always give priority to paying off their mortgage and paying for things like school tuition.

It will take time for the public’s faith to be regained. They have cut their budget for international trips.

The best thing to do with your tax return in 2023, according to Mr. Feeney, is to be “proactive” and file it early so that you can get “money back in your pocket quickly.” Once you do that, look to see if you have any expensive debt, such as credit cards and loans with interest rates of 10 to 20 percent. Attempt to repay them in full or in part.

“And build up that safety cushion. If you have a mortgage, try to put that money in your offset account because doing so will really cut down on the interest people will pay.