Navigating Smaller Tax Returns: Finding Opportunity Amid Change

Tax time can be a rollercoaster. One part anticipation, one part dread. While many look forward to a tidy refund, this year’s numbers might not be what you expect.

In 2023, the average refund came in at a very welcome $2,800, a pleasant bonus for many Australians. But 2024 tells a different story. With inflation, interest rate hikes, and changes to key tax offsets, many are seeing smaller refunds or even unexpected bills.

Let’s unpack what’s changed.

1. The End of the Low and Middle-Income Tax Offset (LMITO)

One of the biggest changes this year is the reduction, and eventual end, of the Low and Middle-Income Tax Offset (LMITO).

Originally introduced as temporary tax relief for those earning between $37,000 and $90,000, the LMITO provided up to $1,500 in tax offsets. This directly boosted refunds or reduced liabilities.

But in 2024, the LMITO has been discontinued.

Result?

Smaller refunds, or in some cases, surprise tax bills. If you’ve noticed a drop in your return, this is likely why.

2. Reduced Deductions for Working from Home

Remote work changed the way Australians claim deductions. During the height of the pandemic, the ATO introduced a generous 80c/hour ‘shortcut’ method for claiming home office expenses – from electricity to depreciation of work equipment.

That’s changed.

For the 2022–23 and 2023–24 financial years, the ATO’s updated fixed rate method is 67c/hour – and no longer includes depreciation for home office equipment.

You can still claim depreciation using the actual cost method, but you’ll need detailed records and calculations to support your claim.

3. A Silver Lining: Why a Smaller Refund Might Be a Good Thing

Here’s a shift in perspective.

A big refund means you’ve effectively loaned the ATO your money interest-free for the year. According to UNSW Associate Professor Ann Kayis-Kumar, this isn’t ideal financial strategy. A smaller refund may mean your tax withholding has been more accurate – giving you better cash flow throughout the year.

And if you owe tax? That could indicate a higher income bracket – a sign your earnings have improved. Not such a bad outcome after all.

4. Key Tips to Avoid Tax Surprises

Whether your refund is larger, smaller, or non-existent, keep these in mind:

✔ Update Your Health Insurance Details

A change in income? Update your private health provider, or you could face premium hikes and repay government rebates.

✔ Be Careful Claiming the Tax-Free Threshold

Only claim the tax-free threshold from one job. Claiming it from multiple employers often results in a tax shortfall and an unexpected bill.

✔ Stay Tax Compliant

Lodging late or under-reporting income can trigger ATO interest charges, penalties, and unwanted scrutiny. Stay on top of your obligations.

We're Here to Help

We know tax isn’t one-size-fits-all. Whether you’re a sole trader, employee, or running multiple income streams, we can help you understand exactly where you stand.

📞 Call us at 02 9411 5422 or book a consultation online. Let’s make sure you get every dollar you’re entitled to and avoid any nasty surprises.

Dolman Bateman | Straightforward tax advice you can trust.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.