Will I get $1080 payment this tax time? How to claim income offset

Aussies scrambled to get their hands on the tax offset last year and accountants expect the mad rush to be even greater this year.

The roll out of the federal government’s low and middle income tax offset in 2019 caused mass confusion as well as a spike in early lodgements as Aussies scrambled to get the cash.

And this year, the frenzy is expected to be even greater.

As the coronavirus crisis takes its toll on the Australian economy and leaves millions of workers in the lurch, tax professionals are bracing for an onslaught come tax time.

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The good news for those feeling the squeeze is that the offset is back on the table again this year.

Here’s everything you need to know to claim it.

THE OFFSET

According to the ATO website, if your taxable income is less than $126,000, you will get some of the low and middle income tax offset.

The maximum offset is $1080 per year, but the base amount is far less at $255 per annum.

The amount of the offset you are entitled to will depend on your individual circumstances, such as your income level and how much tax you have paid throughout the year – and if you earn above that cut-off, you won’t get a cent.

The new low and middle income tax offset is available for the 2018–19, 2019–20, 2020–21 and 2021–22 income years and is in addition to the low income tax offset.

But it’s just that – an offset – so if you’re expecting it to come in the form of a lump sum, prepare to be disappointed.

The $1080 offset is another incentive to lodge your tax return on time. Picture: iStock

“It’s not a cheque for $1080 from the government, it’s more complex than that. It’s a tax offset which reduces your overall tax bill, which could mean you will either get a bigger refund than you normally would, or alternatively, you might end up having to pay less if you receive a tax bill,” H&R Block’s director of tax communications Mark Chapman previously told news.com.au.

Mr Chapman said he believed there would be an “even bigger spike” this year in Australians lodging their tax returns as soon as possible in order to receive that offset, as household budgets have been stretched further than normal.

“The tax offset is coming around again and it will be an incentive for people to lodge early, as they will be desperate to get their hands on their refund,” he explained.

“A lot of people who have lost their job over the course of the year and are experiencing financial stress will be really keen to get their refund ASAP, and they may well get a bigger refund than usual.”

But according to Ben Johnston from leading Sydney accounting firm Willett Johnston Partners, the offset will be available for the next few years – and for that reason, “the urgency has been sucked out” now as the bonus has become “almost the norm”.

HOW DO I CLAIM IT?

If you’re worried about the process, you shouldn’t be – because you don’t have to lift a finger to claim it.

The ATO website states “you are not required to do anything to claim the low and middle income tax offset, we will work out how much you are entitled to and include it in your tax return”.

In other words, it is automatically calculated in at the time you lodge your tax return, so it will be factored into your final refund estimate.

You can find out how much of an offset you were entitled to in the “non-refundable tax offsets” section of your notice of assessment.

TAX DEADLINE TO COST $850

A tax expert has warned it’s “inevitable” that a looming deadline will end up hurting taxpayers’ wallets as the coronavirus crisis rages on.

While the final deadline to lodge your tax return is generally October 31, there is a loophole – taxpayers who lodge through a tax agent instead of going it alone can take advantage of concessional extended deadlines that allow their agent to lodge a form on their behalf up to May 15 the following year without incurring any penalty.

The Australian Taxation Office already pushed back that final cut off date to June 5 this year because of the chaos and uncertainty caused by the pandemic.

The ATO has also confirmed that if you are unable to meet the lodgment due date for these obligations, no late lodgment penalty will be imposed if the return is lodged by June 30, 2020.

However, that still might not be enough to save you from a hefty penalty.

THE PROBLEM

According to Ben Johnston from leading Sydney accounting firm Willett Johnston Partners, overworked tax professionals have recently been grappling with the triple whammy of helping clients with the JobKeeper subsidy while the due dates for lodging and paying Business Activity Statements and filing last year’s tax returns fast approached.

He said that unforeseen workload had caused a “bottleneck” and made it harder for agents to meet those key deadlines, and that the personal pressures suddenly facing many clients had also caused further delays.

“We’ve been hammered in all directions in terms of what is due within a one-month period,” he explained.

“Accountants have had to nurse clients through the JobKeeper process and even some of the clients themselves have been finding it difficult to get all the information together because they’ve been focused on job preservation and getting their own life in order, so some clients haven’t been as forthcoming as they usually would because of everything else going on.

“People are worried about how to reinvigorate their businesses to make money and they’re distracted by the first true recession we’ve had in quite a long while, so that’s pushed some compliance responses to the side while they concentrate on survival.”