Expert reveals why many taxpayers received smaller refunds this year

Many Aussies who are expecting a much fatter refund than usual this year will get a very rude shock after lodging their tax returns.

We heard so much about Scott Morrison’s $1080 tax offset earlier this year that we rushed to lodge early tax returns in record numbers.

But it turns out scores of us have been left with far smaller refunds than we were expecting.

H & R Block director of tax communications Mark Chapman told news.com.au the average size of refunds this year had increased by $420, from $2380 to $2800.

But he said the low and middle income tax offset gave taxpayers earning between $37,001 and $126,000 an additional tax offset of between $255 and $1080.

As a result, people have begun to question why the size of the average refund has increased by such a small amount given the size of the extra offset that people received.

Mr Chapman said it was likely due to fear surrounding what could and could not be claimed and the mad rush to lodge returns early to receive refunds faster.

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He said the Prime Minister’s offset announcement resulted in people racing to lodge via myTax, with lodgements filed through that portal up 11 per cent compared with the previous year.

However, phone calls to the ATO asking for assistance are up 35 per cent this year, and 25 per cent more taxpayers than last year have later lodged amended tax returns.

Mr Chapman said myTax pre-filled income information but not deductions, which taxpayers need to complete themselves.

And he said many taxpayers found it difficult to locate the deductions section in myTax, and even those that could find it often struggled to understand all the deductions they were entitled to.

In a nutshell, he said people who lodged their own tax returns appeared to have claimed the tax offset, but many lost some of the extra refund they could have received because they didn’t claim all the deductions they were entitled to.

“I think there were two issues – first of all, the ATO was pushing some really hard messaging around people over-claiming work-related deductions, and I think that has had a bit of a chilling effect in terms of people making claims,” he said.

If you’ve made a mistake, you have two years to fix your tax return. Picture: iStock

“And secondly, it’s tied to the offset. People rushed to lodge their returns, particularly through myTax and particularly in July, and a lot of people ended up simply not claiming things they could claim – and in some cases, they didn’t claim anything at all.

“There has been a degree of nervousness about it, and people are also not understanding what they can claim. They were keen to get that offset, but … we know people have got it wrong the first time because many people have tried to correct it later.”

But the good news is that people who missed out on claiming things they were entitled to have two years to amend their return from the date they lodged.

“You’ve got plenty of time, and the best way do it is with a tax agent who can help go through your return line by line and make sure everything is there,” Mr Chapman said.

If the ATO then determines you are eligible for more cash, the extra amount will simply be paid into your account just like your regular refund is.

Mr Chapman said things like home office, mobile phone and travel expenses were some of the most commonly forgotten deductions, and the announcement of the offset also caused confusion.

“I think there was a lot of misunderstanding about what the offset actually was – people thought they were getting $1080, but some people got less than that,” he said.

“The common message was that people would be entitled to a bigger refund this year, but unfortunately that hasn’t happened to the extent people were expecting, and it’s not flowing through to the broader economy – people aren’t going out and spending the way the Government expected them to do.”