Your tax refund is about to shrink!

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Although the focus of the budget is on newly announced programs and changes, taxpayers shouldn’t forget that back in October last year the government announced the Low and Middle Income Tax Offset (“LMITO”) was not going to be extended beyond the year ended 30 June 2022.

The LMITO was introduced for the 2019-20 financial year but extended twice due to the pandemic. With the worst of the pandemic seemingly behind us, and the government trying to reduce the size of the budget deficit, it shouldn’t have surprised anyone the offset wasn’t extended for another year.

Six months on, people have forgotten this change but taxpayers will soon see the consequences of it, once they start lodging their 2023 income tax returns and receiving their refunds. While the offset itself wasn’t refundable, it allowed people who’d had tax taken out their wage or who have received dividends with franking credits attached to get some of that tax back. In the 2021-22 financial year, the size of the offset varied as follows:

• For those earning $37,000 or less, the offset was $675
• For those earning between $37,001 and $48,000, the offset was between $675 and $1,500
• For those earning between $48,001 and $90,000, the offset was the maximum $1,500
• For those earning between $90,001 and $126,000, receive $1,500 minus three cents for every dollar earned over $90,000.
• Those earning over $126,000 were ineligible for the offset

With the offset gone, your tax refund is going to shrink by the corresponding amount, but the last couple of months before financial year end is an excellent opportunity to consider what deductions may be available to you to help soften the blow.

You can refer to our earlier article about the changes to working from home deductions here (https://www.karaco.com.au/latest-accounting-news/49231) or review our checklist of common deductions here (https://www.karaco.com.au/files/Individual Checklist.pdf) and as always, feel free to talk to a member of the Karaco team if you have any queries, by calling us on (03) 9836 5711.