Simple mistakes made on your return are among reasons why your tax refund may be a little on the skinny side this year – or worse, it turns into a bill.
Liz Russell, Etax.com.au senior tax agent, lists five main reasons why tax refund time might dash your expectations:
1. A second job can blow out your taxable income. Many working under an ABN or as a sole trader fail to set money aside to pay tax on their second job. The additional income can sometimes push you into a higher tax bracket, which means you’ll have to pay a higher percentage of your overall earnings as tax.
2. An employer withholding too little from your wage. The ATO has “tax withheld calculators” on its website that indicate how much tax should be withheld from salary payments, considering things such as student loans, tax offsets and Medicare levy exemptions.
3. Your tax refund might be used to pay off any outstanding Centrelink, ATO or Family Assistance office debts. This is done automatically, and any leftover money – if any – is what you’ll then have transferred to your bank account.
4. Claiming the tax-free threshold for two or more jobs. If you are an Australian resident for tax purposes, the first $18,200 of your yearly income is not taxed. However, people run into problems if they earn more than $18,200 during the year and they work two jobs while claiming the tax-free threshold on both. Come tax time it’s likely they haven’t paid enough tax during the year and they’ll end up with a much smaller refund than expected and in some cases even owe the ATO money.
5. Making simple mistakes on your tax return can mean either getting little or no tax refund or, more worryingly, having to pay any overpayments back. In some instances, the ATO can also charge interest charges and other financial penalties for incorrect lodgements.
“If you are unsure about why you owe money, or you haven’t received the refund you expected, the best thing to do is reach out to a tax agent,” says Ms Russell.
“A tax agent can fully analyse your personal circumstances and if something has gone wrong they’ll also speak with the ATO on your behalf.”