Lawyer hits complaining Aussies with hard tax return truth

A tax lawyer has blasted Aussies for their “tax return mentality”, revealing some hard truths to those whinging about not getting any cash back this year.

Australians have been told they need to change their tax return mentality. Picture: Harry Dell Tax Lawyer/TikTok

A tax lawyer has revealed some hard truths to whinging Aussies who have been complaining about their low tax returns or being hit with a bill this year.

For the past few weeks, it has been near impossible to go on social media without seeing someone ranting about their tax return.

The end of the low-and-middle income tax offset (LMITO) means that many Aussies are getting less cash back than they have become accustomed to over the past couple of years.

Introduced as a temporary measure in the 2018/19 federal budget, the offset meant those earning between $37,000 and $126,000 were eligible for a tax cut of up $1500.

While most people were aware this measure was coming to an end, many are now being hit with the reality of what losing that extra $1500 actually means – and they’ve taken their complaints to social media.

Getting tired of seeing these constant complaints, Sydney Tax Lawyer, Harry Dell, has stepped in to reveal why not getting a tax return isn’t actually a bad thing.

“I want to talk about the tax return mentality for Australians and tell you why you don’t want a tax return,” Mr Dell said in a recent video.

“And I know this year a lot of people are saying ‘I’m very disappointed I didn’t get a few thousand dollars in my tax return, I even had a bill’. That’s a much better outcome and I’ll show you why.”

In Mr Dell’s example, he showed a calculation of someone earning $80,000 a year who had $10,000 in deductions when they lodged their tax return.

Their taxable was $70,000, meaning they should pay $14,617 in income tax and the Medicare levy.

However, Mr Dell explains this person was taxed as if they were going to earn $80,000 with no deductions, so a higher amount of $18,000 was withheld from their pay, meaning they got a $3500 return.

“Now sure, it is great to get $3500 but what you have done effectively is given the government an interest free loan for that income year,” the tax lawyer said.

“Because on your pay slip when you have pay as you go withholding it goes straight to the government every single week, fortnight or every month.

“So that $3500 tax return is just your money that they are returning back to you after having it in their bank accounts for quite a while.”

For those wanting to maximise their cash flow throughout the year, Mr Dell suggests varying the amount of pay as you go being withheld on your pay slip, which can be done by lodging an application from on the MyGov website.

Mr Dell said Australians need to change their tax return mentality. Picture: iStock

He said that doing this at the start of the year is the best option as it means your withholding rate will be lower and be more likely to reflect what you taxable income will actually be, not your income before deductions.

“Tax return mentality serves the government. It gives them interest free amounts they can continue to spend on stuff and keep rolling it over because you are going to keep getting paid for your job and have pay as you go withholding and haven’t varied it,” he said.

So, what if you have been hit with bill from the ATO? Well, according to Mr Dell this is actually “the best outcome”.

Aussies have until November 21 to pay their tax debt or even later if they are lodging through a tax agent.

“You’ve paid no extra interest on that money having that with you throughout the year, so you can invest in more stuff, you can have more money for a house deposit – all sorts of things,” he explained, adding you can also put in place a payment plan with the ATO to pay off the bill when you get it.

“But if after this, you’re still convinced that you want a tax return, you’re lost.”

Mr Dell isn’t the only tax expert that has been hitting Aussies with hard truths this tax time, with Founder and director of Two Sides Accounting, Natalie Lennon, telling news.com.au that many people don’t understand how tax returns actually work.

“If you are taxed correctly throughout the year on your salary or wage income and do not have any other income or deductions then generally you shouldn’t be needing to pay any tax or getting a refund,” she said.

Natalie Lennon recently explained why Aussies shouldn’t feel entitled to a tax return on her TikTok. Picture: Natalie The Accountant/TikTok

Many Aussies have been complaining about their low tax returns or being hit with bills this year. Picture: Natalie The Accountant/TikTok

One of Ms Lennon’s recent TikToks on the subject revealed there are many that believe they should be getting a tax return every year no matter their circumstances – which just isn’t the case.

“From the comments on my Tiktok which has now had almost 300K views and 700 comments it is clear that the average person feels that they are entitled to a tax refund,” she said.

“People also forget that additional income like interest or dividends or crypto gains are added to your salary and wages and taxed so there will be additional tax to pay on these amounts.”

A lot of information is released in the lead up to tax time, which Ms Lennon believes adds to the confusion surrounding what Aussies should actually be getting back.

“In the lead up to June 30 every year all you hear on the radio and TV is to get your tax time purchases that are tax deductible. More often than not they are not 100 per cent tax deductible as everyone’s circumstances are different,” she said.

“We meet with our business clients before 30 June to estimate their profit for the year and discuss any tax deductible purchases they are thinking of making and then explain that, depending on their tax rate for every $1 they spend on tax deductible purchases, they may only get 30 cents back at tax time.

“They may also not get anything back at tax time, this amount simply reduces any tax they might have to pay.”