The ATO has made some changes that may affect your tax refund. It may be vastly lower than you think, or you may receive a tax bill! This could be for numerous reasons, including:
- The Low and Middle Income Tax Offset (LIMTO) has ended
- Your credit or refund has been offset
- Your income has changed from previous years
- The ATO’s data matching system detects differences in your declared income and the income information they receive through pre-filled data
- You have not advised your employer of a study or training support loan and you earned more income than the minimum threshold
Pro Tax Tip: Some debts won’t be applied to your tax return after you lodge it. That means your tax estimated may not match your final tax outcome. If you do receive a tax debt, it’s important to lodge your tax return on time even if you can’t pay it immediately.
Low and Middle income Tax Offset (LITMO)
The LIMTO ended on 30 June 2022. The 2021-22 financial year was the last year the LITMO could be claimed. This was applied automatically to your tax return. The LITMO won’t be available from the 2022-23 financial years and onwards.
The LIMTO was only available from the 2018-19 to 2021-22 incomes years and was paid in addition to the Low Income Tax Offset (LITO).
You receive the LMITO if your taxable income was less than $126,000 per annum. If you earned over $126,000, you weren’t able to receive the LIMTO. You must also have been an Australian resident for taxation purposes.
The LITO is still available and will be automatically applied if you earned:
- $37,500 or less, you will get the maximum offset of $700
- between $37,501 and $45,000, you will get $700 minus 5 cents for every $1 above $37,500
- between $45,001 and $66,667, you will get $325 minus 1.5 cents for every $1 above $45,000.
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Offset credits on your tax refund
In compliance with legal requirements, if you have an outstanding debt with the ATO, including a debt on hold, they are obligated to utilize any credits or refunds that you may be entitled to in order to offset the debt. This process is commonly referred to as offsetting.
However, there are specific circumstances where they have the discretion to refrain from offsetting. If you are experiencing serious financial hardship, there is a possibility that they may be able to issue the refund directly to you instead.
Pro Tax Tip: In certain cases, the ATO have the authority to apply credits received from other government agencies towards the repayment of your debts. The ATO can also redirect your refund to other Australian Government agencies if you have outstanding obligations with them. For example, if you have overdue child support payments, a portion or the entirety of your refund may be allocated to Services Australia.
Once all your debts have been settled, any remaining credit will be refunded to you accordingly.
Changed Income
If your income has changed, you may incur more or less tax. The tax rates for the 2022-23 income year are:
| Taxable Income | Tax on this income |
| 0 to $18,200 | Nil |
| $18,201 to $45,000 | 19c for each $1 over $18,200 |
| $45,001 to $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
| $120,001 to $180,000 | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and over | $ 51,667 plus 45c for each $1 over $180,000 |
Discrepancy in data
In order to streamline the tax return process and ensure accuracy, the ATO use pre-filled data on your tax return. This data is obtained from various third-party sources, such as health funds, financial institutions, employers, and government agencies.
The pre-filled data becomes available from 1 July, and the majority of the information is finalized by the end of July. However, certain data, such as partnership or trust distributions, may be received at a later date.
Your tax agent will verify if your pre-filled data has been uploaded.
The ATO’s data matching is a highly effective tool utilized for administrative and law enforcement purposes. Through the compilation, validation, and analysis of information obtained from various third-party sources, they are able to engage in a range of compliance activities.
Pre-fill tax returns: By utilizing the gathered data, the ATO can streamline the process of tax return lodgement, simplifying the experience for individuals and businesses.
Safeguard honest individuals and businesses: Data matching helps the ATO protect honest taxpayers and businesses from unfair competition, ensuring a level playing field for all.
Encourage compliance: By utilizing data matching, the ATO encourages individuals and businesses to fulfill their obligations, including the timely lodgement of tax returns and activity statements, accurate declaration of income, and proper claiming of offsets and benefits.
Detect non-compliance: Data matching allows the ATO to identify individuals and businesses operating outside the tax system, enabling them to take appropriate actions to address non-compliance.
Combat fraud: Through data matching, the ATO can detect instances of fraud against the Commonwealth, safeguarding public funds and maintaining the integrity of the tax system.
Debt recovery: Data matching assists the ATO in the recovery of outstanding debts, ensuring that individuals and businesses fulfill their financial obligations.
Pro Tax Tip: The data matching programs are conducted throughout the year, with a particular focus on tax return lodgement period and subsequent tax assessments.
Compulsory payments
Repayments for your study and training support loan are automatically deducted through the income tax system, eliminating the need for you to provide loan information in your tax return. If you have an outstanding loan at the time of lodging your tax return and your repayment income exceeds the minimum repayment threshold, the ATO will calculate your compulsory repayment and include it in your notice of assessment. This applies even if your tax return covers a period prior to your commencement of studies.
The rate of your compulsory repayment increases in proportion to your income. As your earnings rise, so does your repayment amount. Your compulsory repayment is solely based on your individual income and is not influenced by the income of your parents or spouse.
However, if you have a spouse or dependents and your family income is low, you may be exempt from making compulsory repayments if you meet the following criteria:
- You are eligible for a reduction of the Medicare levy due to low family income.
- You are not required to pay the Medicare levy.
The repayment thresholds and rates are updated annually for the compulsory repayment of:
- Higher Education Loan Program (HELP)
- VET Student Loan (VSL)
- Student Financial Supplement Scheme (SFSS)
- Student Start-up Loan (SSL)
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
- Trade Support Loan (TSL).
2022–2023 repayment income thresholds and rates
| Repayment income (RI) | Repayment rate |
| Below $48,361 | Nil |
| $48,361 – $55,836 | 1.0% |
| $55,837 – $59,186 | 2.0% |
| $59,187 – $62,738 | 2.5% |
| $62,739 – $66,502 | 3.0% |
| $66,503 – $70,492 | 3.5% |
| $70,493 – $74,722 | 4.0% |
| $74,723 – $79,206 | 4.5% |
| $79,207 – $83,958 | 5.0% |
| $83,959 – $88,996 | 5.5% |
| $88,997 – $94,336 | 6.0% |
| $94,337 – $99,996 | 6.5% |
| $99,997 – $105,996 | 7.0% |
| $105,997 – $112,355 | 7.5% |
| $112,356 – $119,097 | 8.0% |
| $119,098 – $126,243 | 8.5% |
| $126,244 – $133,818 | 9.0% |
| $133,819 – $141,847 | 9.5% |
| $141,848 and above | 10.0% |
Pro Tax Tip: You can also make voluntary repayments to reduce your debt.
ITP Accounting Professionals Tax agents will help you maximize your tax deductions so you can receive a higher tax return. This year more than ever before, every dollar will count. Appointments book out quickly. To ensure your spot, book online at www.itp.com.au or phone 1800 367 487.