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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.

When comparing your tax refund from one year to the next, it is possible that the total amount you receive will be lower due to a number of different circumstances.

A reduction in the amount of tax refund that you are entitled to receive may occur if you experience a change in your income or if you become ineligible for a tax credit or deduction.

It is not necessary to get worked up about it because it is possible that getting a lesser tax refund will turn out to be beneficial in the long run. Although you might consider your tax refund to be “found money,” a more fair comparison would be to the situation in which you lend your money to the government without receiving any interest in return.

When comparing their tax refund from one year to the next, many taxpayers are taken aback when they discover that the amount of their refund has significantly decreased.

It is likely that your tax refund will be changed if you have lately experienced any changes to your financial status. These changes could include: To prevent being caught off guard by something that comes out of the blue, it is critical to prepare in advance as much as possible.

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.

Their Taxable Income Has Been Blown Out by a Second Job

This is the case the majority of the time when an individual works under their own ABN as a sole trader or has taken up a side job in the sharing economy through a platform such as Uber, Deliveroo, Airbnb, or Airtasker. In both of these cases, the individual is considered to be a single trader.

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

In addition, the larger income may push them into a higher tax band, which means that they will be obliged to pay a greater percentage of their total earnings as tax. This is due to the fact that they will be earning more money overall. In addition to this, in general, they will receive an increase in the amount of money that is coming in.

Taking Advantage Of The Tax-Free Minimum Wage For Two Or More Jobs

For the purposes of calculating your income tax liability, if you are regarded to be a resident of Australia, the first $18,200 of your yearly income is not subject to taxation. Whenever you begin a new position, you will often be required to complete a declaration for your individual taxpayer identification number (ITIN). You will be able to configure this as a result of this.

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

At tax time, it is quite likely that they have not paid a sufficient amount of tax throughout the year; as a result, they may receive a tax return that is much less than they anticipated, and in certain circumstances, they may even owe money to the ATO. The likelihood of this happening is considerable.

Making Errors on the Tax Form

People have the opportunity to make a variety of mistakes when filing their tax returns, some of which may be inadvertent while others may be.

This includes neglecting to declare assessable income (which includes allowances, bank interest, and money received abroad), claiming deductions for which they are ineligible, and lacking the required paperwork to support work-related deductions, among other things. Failing to declare assessable income is one of the offences included in this group.

As a result, the ATO will amend any incorrect claims, and any overpayments will need to be repaid by the taxpayer.

The ATO may also charge interest and other sorts of financial penalties for wrongly filed paperwork, depending on the circumstances.

If you are uncertain as to why you owe money or if you haven’t received the refund you were expecting, get in touch with a tax expert as soon as you can.

A tax agent can completely assess your particular situation, and in the case that something is improper, they will also speak with the ATO on your behalf.

This will not only produce a solution but also show the ATO that you are willing to work together, which, in the event that you owe them money, will frequently stop the imposition of further fines.

On the other hand, if you don’t pay your debts, interest may start to accumulate and, in some cases, your account may even be turned over to a collection agency.

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.


Current Governmental Debt

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.

Too Little of an Employee’s Pay is Being Withheld by the Employer

This is the normal result of an employer failing to deduct an adequate amount of tax from an employee’s paycheck in relation to the employee’s income.

This is especially relevant in circumstances in which the worker is awarded a bonus, in which their overtime hours force them to enter a higher tax bracket, or in which they cross the threshold for HELP repayment and become eligible for the programme.

The Australian Taxation Office (ATO) allows users to use “tax withheld calculators” on its website. These calculators advise how much tax should be withheld from a person’s wage checks.

These calculators take into account a wide range of considerations, such as outstanding student loans, tax credits, and exemptions 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.


In Australia, each year there are around 14 million persons who submit their tax returns. An Australian tax expert has issued a warning that those who are eligible for refunds this year could wind up with less money in their pockets than they had anticipated for a number of reasons. According to numbers that have been published by the Australian Tax Office (ATO), the amount of money received in tax refunds is between 8 and 10 percent lower than in previous years.

Because of the Low and Middle Income Tax offset, you may be eligible for a tax refund that is higher than usual this year. There is no need to get worked up about it; receiving a smaller tax refund may really turn out to be beneficial.

This year’s tax refunds are expected to be lower than those received in 2019.

The data that employers use to determine how much tax to deduct from their employees’ paychecks have been updated. As a result of some employees’ withholding being based on obsolete tax regulations, some refunds and amounts owing have been calculated differently than in prior years.

When preparing their income tax returns, taxpayers run the risk of making a number of different types of mistakes.

This includes omitting to declare income that is subject to taxation (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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