It's officially tax season. You may be dreaming about a little mid-year "bonus" or banking on it for a holiday - but maybe you shouldn't be.
People on TikTok are sharing photos of the amount of money they owe the Australian Taxation Office (ATO) and venting about how little their refund is - if they're getting one at all.
"You'll find me crying behind my desk," wrote one person on TikTok, after sharing a screenshot showing they owed the ATO $6322.50.
"Somebody make it make sense."
Another joked, "I'll be getting $64, oh what should I spend it on."
Someone else posted a selfie, looking miserable with the caption: “Me after seeing my estimated tax return but it says ‘money owing’ rather than ‘money owed’.”
So are people really owing more to the ATO this year?
Why your tax refund may be lower or why you might be getting a bill
Not everyone is owing money to the ATO, but millions will see a drop in their refund this time around.
This year is the first tax time since 2018/19 without the low to middle-income offset (LMITO), which ended on 30 June 2022.
The LMITO was introduced in the 2018-19 budget, was extended during the pandemic, and then increased by the Coalition government last year. It was supported by the Labor opposition at the time.
Neither Labor nor the Coalition had planned for it to be retained for 2022-23 or beyond.
This temporary tax cut was for people who earned between $37,000 and $126,000, initially giving a tax benefit of $1080. Last year, this was boosted to $1500 for people who earned between $48,000 and $90,000 in the 2021-22 financial year.
Cutting the LMITO ultimately means the government will save money — $4.1 billion, according to the 2022-2023 Budget papers. But it means you might see a discrepancy for the first time in a few years.
The low-income tax offset (LITO) is still around for those who earn less than $66,667 per year, with tax being offset up to $700 for people earning under $37,500 per year.
Who is the LMITO loss impacting?
Around 10 million Australian residents claimed the offset in 2020-21. In Australia, the average taxable income is $68,289 and the median taxable income is $50,980, according to the ATO's most recent figures from 2021.
Natalie Lennon, who has been a chartered accountant for over 20 years, says the removal of LMITO is the most likely reason why you may have a smaller refund or none at all.
"That's probably the main reason that people are not getting the refunds that they got in the last couple of years."
Ok, I owe the ATO some money. Now what?
You don't need to pay it all at once, though you can if you like.
If you're strapped for cash at the moment and looking to repay the sum over time, you can contact the ATO to set up a payment plan. Sometimes this can even be done online.
A payment plan allows you to break down your amount owed into smaller amounts to repay in instalments and over a fixed period.
To speak with a financial counsellor in your state or territory call the National Debt Helpline on 1800 007 007.
Call 1800 808 488 to speak to a First Nations financial counsellor from Mob Strong Debt Help.
