Why your tax assessment may be different this year?
Over the past few years, you may have noticed when lodging your income tax return you have received higher than usual refunds, or lower than usual payable amounts.
For 2023 there are changes that may impact these refunds or even result in payable amounts. One of the crucial changes is the ending of the Low and Middle Income Tax Offset (LMITO).
The Low and Middle Income Tax Offset was introduced by the Australian government to provide financial relief to low and middle-income earners. It functioned as a targeted tax rebate that reduced the tax payable or increased the refund amount for eligible taxpayers. The offset was intended to benefit those earning between $48,000 and $90,000 annually, with the maximum offset being $1,080.
This offset was only temporary, running from the 2018-19 to the 2021-22 income tax years.
Reasons for reduced refunds or payable amounts.
The primary reason for reduced refunds or payable amounts for 2022-23 individual tax returns is the elimination of LMITO. Taxpayers who previously received the offset will no longer benefit from this tax concession, leading to a direct impact on their overall tax liability.
With generally strong wage growth during 2022-23, we have seen several individuals or family’s approach and exceed the 2023 Medicare Levy Surcharge (MLS) threshold of $90,000 for individuals or $180,000 for families.
The Medicare Levy Surcharge (MLS) is an additional tax imposed on high-income earners in Australia who do not have private hospital insurance. It aims to encourage individuals to take up private health cover and help fund the public healthcare system.
The MLS rate is between 1 – 1.5% of your rebate income and can significantly affect your tax outcome.
As a result of the above, individuals may experience reduced refunds or find themselves owing money when lodging their tax returns.
Our advice is to get in touch with us early, so we can prepare your returns, review your deductions to ensure you are claiming what you are entitled to and estimate your individual tax outcome well in advance of any due dates.