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Why Is My Tax Refund So Low?

If you are an Australian resident for the purposes of income tax and you pay tax on the portion of your taxable income that is subject to tax, you may qualify for both of the following:

  • offset for taxpayers with modest incomes
  • tax relief for those with low and medium incomes

In order to benefit from these tax offsets, it is not necessary for you to fill out a particular part of your tax return. After you have submitted your tax return, we will calculate your tax offset for you. If you are eligible for any offset, it will be included to your tax return, and the amount will be shown on your notice of assessment; however, you will not be given the offset as a separate payment.

The prospect of an impending tax return in the year 2020 is made all the more alluring by the fact that Australia is currently experiencing a recession as a direct result of the terrible coronavirus outbreak.

However, a tax specialist from Australia has cautioned that there are a number of reasons why taxpayers who are qualified for refunds this year could wind up with less money than they had anticipated.

About eight out of every ten people in Australia who file tax returns are eligible for a cash return. However, for some of us, the amount of the refund that we are entitled to receive is significantly lower than what we had anticipated.

The issue “Why has my tax refund decreased?” is one that is frequently asked by our customers. Therefore, in this piece, we will discuss the most prevalent factors that may cause your tax return to be lower. After that, we’ll offer a little piece of advice on how to steer clear of a scenario like this the next year.

To begin, let’s divide it up into two categories: first, the reasons why your refund might be smaller from one year to the next, and second, the reasons why your anticipated refund might be smaller between the time you file your return and the time the ATO sends you your final refund.

The year 2020 has been a challenging one for many people in Australia, as the country-wide impact of massive job losses and changes in working conditions has been felt by a large number of workers. It is understandable that a lot of people are looking for some respite and wondering if it would come in the shape of a larger tax refund this year. This would be a welcome development.

How Do Tax Refunds Work In Australia?

Each year, around 14 million people in Australia fill out their tax returns. Of those who are eligible for a refund, approximately two-thirds receive one, and the average amount they receive is little more than $4,000.

This results in a total refund of more than $3 billion. Therefore, it is in your best interest to ensure that you are doing everything in your power to obtain the largest possible return.

You have until October 31 to file your tax return in order to avoid penalties (or you may be eligible for an extension beyond this date if you are registered with a tax accountant by 31st October).

The processing of the return will take roughly two weeks; however, your agent can keep you updated on the status of your return at any time.

These dates will not change, nor will the regular method for submitting your tax return be altered by COVID-19. Due to the Low and Middle-Income Tax Offset, which is available to a large number of taxpayers, it is possible that you will receive a greater tax refund this year.

Car Tax Deduction

Why Is My Tax Return Lower?

According to the most recent timetable released by the ATO, a significant number of individuals have already begun receiving their tax refunds. However, one of the questions that keeps coming up is why it is at such a low level.

Or, to put it another way, why is the amount of the return payment so much less than what was anticipated when compared to the amounts received in previous years?

In point of fact, the ATO has made public the numbers indicating that refunds are down between 8% and 10% compared to the previous year.

There are a variety of factors that could lead to a reduction in the amount of tax refund you receive from one year to the next.

A change in your income or the loss of eligibility for a tax credit or deduction can result in a decrease in the amount of tax refund you are due.

There is no need to get worked up about it; receiving a smaller tax refund may really turn out to be beneficial. Despite the fact that you may consider your tax refund to be “found money,” it is more accurately analogous to the situation in which you lend your money to the government without receiving any interest.

Many taxpayers are taken aback when, from one year to the next, they see a significant decrease in the amount of their tax refund.

If you’ve recently had any changes to your financial status, it’s possible that your tax refund will be affected. It is essential to get ready ahead of time in order to avoid being taken aback by something unexpected.

Reasons Your Tax Refund Was Lower Than You Expected

If the thought has entered your mind, “Why was my tax refund so low when I filed my 2018 tax return in 2019?” the answer certainly has something to do with the recent tax change. Due to the fact that tax reform included new tax brackets, modifications to itemised deductions, and a rise in the basic deduction, many taxpayers were left feeling bewildered.

As a result of modifications to their withholdings made at the beginning of 2018, some taxpayers began receiving larger paychecks, which meant that they paid less in taxes as the year progressed.

Even though such taxpayers will have paid less in taxes overall as a consequence of the change, they may receive a lesser tax refund than they had anticipated as a result of the change.

A further consequence of the tax reform that was enacted before the end of 2017 was that the ATO modified the information that employers use to compute the amount of tax that should be withheld from their employees’ paychecks after the beginning of the year.

This meant that for certain employees, their withholding was based on obsolete tax legislation, which caused some refunds and balances owed to be different from what they had been in previous years.

Every year, millions of people who pay taxes anticipate excitedly receiving a return, and 2020 will be no different.

Taxpayers who submitted their returns to the Australian Taxation Office (ATO) in a timely manner have already begun to get their refunds, as the ATO began taking returns in late January.

But preliminary information from the ATO shows that it appears as though taxpayers may receive lesser refunds in 2020 compared to 2019 so far.

The typical return was $3,125 as of a few days ago, which is lower than the average refund of $3,143 at this time last year.

Even though lower refunds are, in theory, a positive thing, the reality is that those Australians who rely on them the most may find them to be a source of anxiety.

A Second Job Has Blown Out Their Taxable Income.

When someone works under their own ABN as a single trader or has picked up a side job in the sharing economy through a platform like Uber, Deliveroo, Airbnb, or Airtasker, this scenario occurs the majority of the time.

People who are used to working under standard employment arrangements, in which taxes are withheld from their wages on a regular basis, might not be aware that they need to set some money away in order to pay taxes on their second job as well.

Further, the greater income might sometimes push them into a higher tax band, which means that they will be required to pay a higher proportion of their total earnings as tax. This is in addition to the fact that they will have more money coming in overall.

Claiming The Tax-free Threshold For Two Or More Jobs

If you are considered a resident of Australia for the purposes of income tax, the first $18,200 of your annual income is exempt from taxation. When you start a new job, you will typically fill out a declaration for your tax file number. This will enable you to set this.

However, individuals will run into issues if they make more than $18,200 during the year and claim the tax-free level on both of their employment, as this will cause them to be subject to double taxes.

At tax time, it is highly likely that they have not paid a enough amount of tax throughout the year; as a result, they may receive a tax return that is far less than they anticipated, and in certain situations, they may even owe money to the ATO.

Making Mistakes On The Tax Return

When preparing their tax returns, individuals have the potential to make a number of mistakes, some of which may be unintentional while others may be intentional.

This includes failing to declare assessable income (which includes allowances, bank interest, and income earned overseas), claiming deductions for which they are not eligible, and lacking the necessary documentation to substantiate work-related deductions. Among the other offences that fall under this category is failing to declare assessable income.

The result of this is that the ATO corrects any false claims, which means the taxpayer is responsible for repaying any overpayments.

Additionally, depending on the circumstances, the ATO may also levy interest and other types of financial penalties for incorrectly lodged documents.

Get in touch with a tax professional as soon as you can if you are confused about the reason why you owe money or if you haven’t received the return you were anticipating.

Your individual circumstances can be thoroughly evaluated by a tax agent, and in the event that something is incorrect, they will also communicate with the ATO on your behalf.

This will not only result in a solution, but it will also demonstrate to the ATO that you are prepared to collaborate, which, in the case that you owe money to them, will often prevent the imposition of additional fines.

On the other hand, if you do nothing to settle your obligations, interest may begin to accrue, and your account may even be turned over to a collection agency in some circumstances.

You Can’t Bank On A Sizeable Refund Every Year

Even if you received a sizable tax refund the previous year, there are a number of potential explanations as to why you may have received a much smaller amount for the 2016–2017 fiscal year.

This can happen if you get a salary raise or a second job that puts you into a higher tax bracket, if you have current government debt that is automatically deducted from your tax return, or if you make the mistake of claiming the tax-free threshold on two or more jobs at the same time.


Existing Government Debts

In the event that you have an outstanding balance with Centrelink, the ATO, or family assistance, your tax refund will be applied towards the settlement of that balance.

This is handled on your behalf by an automated system, and if there is any money left over after that, it will be deposited into your bank account at that time.

An Employer Is Withholding Too Little From An Employee’s Wage.

This typically happens when an employer does not deduct enough tax from an employee’s paycheck in proportion to their income.

This is especially true in situations where the employee receives a bonus or their overtime hours push them into a higher tax bracket or cause them to cross the HELP repayment threshold.

On its website, the ATO provides users with “tax withheld calculators,” which suggest how much tax should be withheld from salary payments.

These calculators take into consideration a variety of factors, including student loans, tax offsets, and exclusions from the Medicare levy.

The Impact Of Lower Refunds

In contrast to the widespread belief, a tax return does not constitute “free money.” Instead, it refers to income that was earned but was not initially collected.

Despite this, a significant portion of households in Australia rely on tax returns to cover significant expenditures, eliminate debt, or take care of expenses they have been putting off, such as medical treatment.

A tax refund that is far lower than what was anticipated may present significant challenges for these families.

Again, in theory, a smaller refund should not be viewed as a negative development because it indicates that you provided the government with a smaller interest-free loan and that you instead collected a larger portion of your income as you earned them.

However, if you are basing your financial plans on a particular refund amount and it turns out to be less than you expected, your plans could be derailed entirely.


Around 14 million people lodge a tax return each year in Australia. An Aussie tax expert has warned there are several reasons why those eligible for refunds this year could end up with less in their pockets than expected. The Australian Tax Office (ATO) has published figures that refunds are down 8% to 10% from prior years.

This year, you may receive a larger tax refund due to the Low and Middle-Income Tax offset. There’s no need to panic – a lower tax refund can actually be a good thing.

Tax refunds are coming in smaller this year compared to 2019.

Employers changed the information they use to calculate how much tax to withhold from their employees’ paychecks. Some employees’ withholding was based on outdated tax laws, making some refunds and balances due different from previous years.

There are a variety of errors that taxpayers can commit when filling out their tax return.

This includes failing to declare assessable income (which includes allowances, bank interest and income earned overseas).

Contact us today at (03) 8568 3606 or [email protected] for a consultation if you’re unsure about why you owe money.

A tax refund isn’t free money — it’s earned income that was never collected upfront.

But a large number of Australian households depend on tax refunds to cover major bills, pay off debt, or address expenses. A lower refund than expected could throw their financial plans out of whack.

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