File your tax refund sooner to grab your tax cut early
Aussies will soon have a tax cut of up to $1080 available to them through their tax refunds. But there’s a habit you’ll need to break if you hope to be among the first recipients.
As federal politicians squabble about tax cuts, households should consider changing their habits and doing their annual tax returns as soon as they can this year.
A tax cut of up to $1080 will soon be payable to more than 11 million Australians but will only be paid via their tax refunds.
Australian Taxation Office data shows about 60 per cent of taxpayers submit returns later than August.
If this delay is repeated this year it will effectively gift the Government an estimated $30 million from holding peoples’ money for longer.
Both sides of parliament want to give Australians the tax cut but are arguing about whether it is paid in one lump sum or split in halves — the first half is already legislated and the second half is payable once the full tax reform package passes parliament.
Returns can be lodged from July 1, although the ATO urges waiting until all information is available and pre-filled, usually by mid-August, to avoid penalties and debts.
“We recommend waiting until the pre-fill data is added to your return,” said ATO assistant commissioner Karen Foat.
“That way, employment income, interest earned on your bank accounts, private health insurance details and other information we receive will already be included, making it easier for you to get it right when you lodge,” she said.
“Every year we have to amend returns for thousands of taxpayers because they lodged before the pre-fill was available.”
MORE: New July 1 laws that could cost you
MORE: How to turn a great business idea into cash
MORE: The July 1 payroll change that’s confusing bosses
However, some tax specialists recommend lodging sooner where possible.
Online tax agent Etax’s senior tax manager, Liz Russell, said there was no reason to wait if all your information was ready to go.
“You are doing yourself a disservice waiting for a refund,” she said.
“Get in as quick as you can.”
Ms Russell said many people could now access their bank interest, share dividends and other data electronically and did not have to wait for banks and companies to send that data to the ATO.
She said employers handing out paper payment summaries had until July 14 to deliver them. Bosses who had already gone digital had a July 31 deadline, but their workers’ data should be finalised on my.gov.au by early July, she said.
People with managed funds could not finish tax returns until their funds’ tax statements had arrived, while those who had made tax-deductible contributions to super must apply for a letter from their fund confirming the contribution, Ms Russell said.
Grattan Institute program director on budget policy Danielle Wood said taxpayers should lodge returns early to get the lump sum.
“People with variable incomes can end up scrambling to find substantial amounts of cash at the end of the year to deal with overpayment of family benefits and childcare payments,” she said.
“A lump-sum payment can help with these benefit-related cashflow issues. Annual lump sum payments probably also provide a bit more economic stimulus — they are more likely to be treated by taxpayers as a windfall gain and spent compared to a discount off ongoing tax.”
LET’S TALK TAX
• The tax cut, officially known as the Low and Middle Income Tax Offset, can only be accessed by filing your tax return.
• Its maximum cut of $1080 applies to 4.5 million taxpayers earning $48,000 to $90,000 a year.
• A further 5.6 million people are eligible for a portion of the offset, while people earning above $126,000 receive nothing.
• It is based on taxable income, which is the amount left after all deductions have been claimed.
Originally published as File your tax refund sooner to grab your tax cut early
