Sometimes when you were expecting a nice little tax refund into your bank account and you end up with a tax debit, it can be a little hard to swallow and leave you wondering why!?  If you have been in this position, we have put together a few points on how to avoid this same situation happening next year and how you can prepare in advance!

If your refund is less than you expect, these are the most common reasons which you may not have taken into consideration:

  • The refund amount has been offset against another debt, either another tax debt (previous income tax bill, or activity statement debt), or another government agency debt (Centrelink, or Child Support Agency)
  • Compulsory payments, such as: Higher Education Loan Program (HELP); Trade Support Loan (TSL); VET Student Loan (VSL); or Student Financial Supplement Scheme (SFSS) repayments
  • You need to pay Medicare levy surcharge because you stopped paying private patient hospital cover and your income is above a certain threshold
  • New or amended income tests
  • Excess concessional contributions to a super fund
  • Your employer incorrectly reporting reportable employer superannuation contributions on your payment summary
  • Tax was not withheld from a taxable payment (such as Jobseeker payments) and your total income for the year was more than the tax-free threshold
  • You incorrectly claimed the tax-free threshold.
  • You are an employee and enough tax has not been withheld from the payments made to you by your employer
  • You are a sole trader and have not paid enough tax to the ATO throughout the year
  • Receive other income where no tax was withheld such as Centrelink payments
  • Working for more than 1 employer and have compulsory payments, such as: Higher Education Loan Program (HELP); Trade Support Loan (TSL); VET Student Loan (VSL); or Student Financial Supplement Scheme (SFSS) repayments

TIPS FOR AVOIDING TAX DEBT AT THE END OF THE YEAR

  • Claim tax free threshold only from 1 employer in a financial year
  • If you have HECS debt and you are working for 2 employers, you need to pay extra tax based on percentage of your total income from both employers. Check your HECS repayment rate on https://www.ato.gov.au/Rates/HELP,-TSL-and-SFSS-repayment-thresholds-and-rates/
  • Set up PAYG instalment payments with ATO if you are sole trader
  • Ask Centrelink to withhold tax on any benefits received from Centrelink
  • Seek financial advice if you are planning to contribute a big amount to your super fund.
  • If you are earning more than $90,000 or earning more than $180,000 as a family, seek advice to get private health insurance cover to avoid Medicare levy surcharge
  • Know in advance if you have any debts with ATO or Centrelink or another government agency.

 

Kim Sandhu – Senior Accountant

CPA – B.Com M.Acc