Why is my 2023 tax refund so low?

This year, things have changed and many people will receive much lower refunds than they did last year. Those who are affected by this change may be interested in knowing some of the reasons and what they can do to change it.

It is possible for tax rules to change from year to year, often due to political and social changes, and these changes can sometimes increase or decrease your refund.
Here we’ll answer the three biggest questions about tax returns this year:

Why is my tax refund this year lower than I expected?

There are several reasons why your tax return might be lower than you expected this year.

The Low-Middle Income Tax Offset (LMITO) was discontinued, which provided tax breaks of up to $1,500 to those with taxable incomes up to $126,000. Since several years, this offset has not been available to taxpayers and it will make a difference of between $675 and $1500 to many tax returns.

Another significant change that will be felt by many taxpayers this year is a shift in the way deductions can be claimed by anyone working from home. The main change is that you can no longer use the 80c-per-hour “shortcut” method (that was temporarily introduced in 2020) or the old 52c per hour fixed rate and must instead use either the revised fixed rate method or the actual cost method to calculate deductions. The actual cost method remains the same, but the fixed rate method has changed to 67 cents per hour for each hour you work from home for a specific list of expenses (that is different to the old fixed rate) that includes electricity and gas usage, phone usage (mobile and home), internet usage, stationary, and computer consumables.

This method does not allow you to claim any additional deductions for these expenses. A fixed rate method doesn't allow you to claim a separate deduction if you use your mobile phone for work and at home. Instead, you’ll have to choose the actual cost method.

In the period from 1 July 2022 to 28 February 2023, taxpayers must keep a complete record of all the hours they work from home. The revised fixed rate will not be available to taxpayers who don't keep sufficient records from 1 March 2023.

In addition to these complicated new rules, don’t forget there are also several other factors that are not new but could also impact your bottom line at tax time and are worth remembering.

Many people have picked up extra work in recent times, ranging from an additional part-time gig to freelance work or other side hustles. This could include work like driving for Uber or doing deliveries, renting out your spare room on Airbnb or picking up some casual shifts on the weekend – and they all need to be included in your tax return and could impact your final refund amount.

Remember that if you don't have private health insurance, you might have to pay a Medicare levy surcharge as part of your tax return if you don't have private health insurance. Your final refund amount may also be affected by any outstanding student or government debts.

In the event that my tax return is lower than I expected, what should I do?

It's important to carefully review the tax return and ensure it aligns with your expectations. In the event that it does not, action needs to be taken. You can do this by speaking to one of the knowledgeable tax consultants at TAS Tailored Accounting Solutions, who are experienced tax professionals.

What can I do to increase my tax refund next year?

If you want to make sure you get every dollar you're entitled to at tax time, work with a trusted tax consultant.

Many people miss out on deductions when it comes to home office furniture and computers, superannuation contributions, education expenses, and financial advice fees – so it really pays to work with someone who knows what they are doing when it comes to completing your return and making sure you have proof of purchase for everything you include.

Our team here at TAS Tailored Accounting Solutions will make sure you get ALL the tax deductions you’re entitled to, which will help you to secure the maximum possible refund going forward.