Many Australians are discovering that for the 2022/23 financial year they are either receiving a smaller refund, or they actually owe the ATO money. Here are the most likely reasons this may be occurring.
The Loss of the Low and Middle Income tax offset
This is likely the biggest reason that your tax return may look different this year.
The low and middle income tax offset was introduced for the 2019 financial year, where taxpayers earning between $37,000 and $126,000 could gain a tax benefit of up to $1,080 depending on how much they earned.
This offset increased to $1,500 for taxpayers earning between $48,001 and $90,000 in the 2021/2022.
This offset ran out on 30 June 2022, so if you have a discrepancy of about $1,500 in your 2022/23 return, this could be the cause.
Higher Tax Bracket
Earning even just a little bit more money than you did last year could be the reason you’re getting billed this tax time, especially if you have a HECS/HELP debt.
Compulsory HECS/HELP payments work by advising your employer that you have a loan, so a certain amount of your income is taken from your pay each week depending how much you earn, however these payments are held by your employer and don’t get applied to your loan until tax time.
So, if you end up earning over your annual salary, you could be pushed into the next compulsory repayment threshold.
This could also be the case if you haven’t informed your employer that you have a HECS/HELP loan. This would mean that no money was withheld during the year and you’ll have to pay the full compulsory amount.
Medicare
Unless you have an exemption, all Australians pay a Medicare Levy. It is 2% of your taxable income.
However, if you earn over $90,000 as a single person and you don’t have appropriate private health insurance cover, you’ll also be up for the Medicare levy surcharge. This could be up to an extra 1.5% of your taxable income, on top of the 2% Medicare levy.
What to do if you receive a tax bill
In the case that there’s been no miscalculation, you will have to pay your bill on time. This may be November 21 if you are preparing your return yourself. If you pay late, the ATO will charge you interest on the debt.
If you are unable to pay your debt on time, you can you could contact the ATO.
Alternatively, contact our office for assistance in completing your 2023 tax return to ensure it is completed correctly.
For more information, visit https://www.abc.net.au/news/2023-07-24/why-do-i-owe-the-ato-money-tax-refund-return/102613736
