Australians can expect ‘bumper’ tax refund this year thanks to backdated tax cuts

Most Aussies will get a larger than normal tax refund this year thanks to tax cuts that have been brought forward. Find out how much you’ll get.

Most Aussies can look forward to a “bumper” tax refund this year due to changes that will boost the amount of money they get back from the tax office.

On top of the extended Low and Middle Income Tax Offset (LMITO) worth up to $1080, most Australians will also get extra money from backdated changes to tax thresholds that came into effect at the end of last year.

The Morrison Government brought forward Stage 2 tax cuts in the 2020/21 budget so they would begin in July 1 last year but the legislation was not passed until October 9.

Most people would have noticed a little extra money in their pay packets after October 14 once the legislation received Royal Assent.

H&R Block tax communications director Mark Chapman said most people had already got at least 8/12ths of the tax cuts through their pay but people are still owed a refund on the tax they paid from July 1 until the tax cut showed up in their pay packets.

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“Because those changes in the tax thresholds were only announced on Budget night (October 6), the Australian Taxation Office was only able to adjust tax tables from the date the legislation passed, meaning that the tax cuts from 1 July through to the date of Royal Assent will be passed on through people’s tax returns,” Mr Chapman said.

The timing of when you received the extra money in your pay packet would have varied depending on whether you got paid weekly, fortnightly or monthly, and how quickly your employer acted on the tax changes to boost your pay.

Most people would have got the exta money by November last year.

Many Australians will get a larger than normal tax return this year. Picture: iStock

For someone on $80,000 a year, Mr Chapman said the tax cut was worth $1080 a year, or $20 a week.

If they didn’t get the tax cut into their pay packet until November 1, 2020, this means they missed out on four months of tax cuts (around 17 weeks) which will now come through to them via their tax return.

They should get back around $340 as a tax refund this year ($20 a week multiplied by 17 weeks).

Combined with $1080 from LMITO, this means they can look forward to a tax refund of about $1400.

“Australians will get a bumper tax return this year,” Mr Chapman said.

This includes anyone who got JobKeeper payments as this money is considered part of someone’s assessable income.

“So yes, people on it will get the extra back if their assessable income is high enough,” he said.

However, you must lodge a tax return in order to get both payments.

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For those earning between $43,001 and $90,000 the tax cuts are worth $1080 a year, while those earning $90,000 and $120,000 will get up to $2430 a year, and for those earning over $120,000, they get back about $2430 a year.

This is because the upper threshold for the 19 per cent tax bracket has been raised from $37,000 to $45,000, and the lower threshold for the 37 per cent tax bracket has been raised from $90,001 to $120,000.

The means everyone earning between $45,001 and $120,000 will now pay 32.5 per cent tax (previously this tax bracket was for people earning $37,001 to $90,000).

The changes to the tax thresholds come on top of the Morrison Government’s decision to extend the so-called “lamington” tax offset for 2020/21.

This temporary offset provides a maximum amount of $1080 to those earning between $48,000 and $90,000. It gradually phases out, disappearing after $126,000.

Those earning less than $37,000 receive $255 and this gradually increases up to $1080 once you get to $48,000.

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