‘Never that high’: Why so many Aussies have a tax debt this year

If you’re one of the Aussies who’s recently been blindsided by a tax bill, you are not alone. This is why so many are copping debts this year.

If you are one of the Aussies who has copped a bill after lodging their tax return this year, then you are not alone, with an accountant revealing she has witnessed a significant rise in the number of debts being issued.

We are now half way through July and the number of people taking to social media after being told they owe money to the Australian Taxation Office (ATO) has been steadily rising.

The tone of their posts range from disappointed to outright furious, but it is clear a significant number of Australians are really unhappy this tax time.

Tax Invest Accounting director and tax agent Belinda Raso told news.com.au she has seen an explosion in people being hit with tax debts, with numbers rising since the end of the low and middle income offset in 2022.

Previously, Ms Raso said, people who received a tax bill predominantly knew they were going to be getting one.

Belinda Raso, tax agent and director at Tax Invest Accounting, has seen a significant rise in the number of people being hit by tax debts. Picture: Tax Invest Accounting/TikTok

Social media has been flooded with people complaining about their tax bills. Picture: @izzaaakkkk/TikTok

For example, people who forgot to tell their employer about their HECS-HELP loan, claimed the tax free threshold twice, people with side hustles or those with a positively geared investment property, would be unsurprised by the arrival of a tax bill. But now plenty of unsuspecting Aussies are being hit with unexpected debt.

“Since 2023, I’m not exaggerating, I’m looking at 20 to 30 per cent of clients that are ending up with the tax debt. It was never that high,” the tax agent said.

Ms Raso shares a lot of content on social media around tax time and has this year been inundated with messages from people who have no idea why they have received a tax debt.

On TikTok alone she says she can get about 20 messages a day from people who owe the ATO money.

“I could be speaking to 30 or 40 people daily that are not even clients, that are begging for help,” she said, adding that she always works to help these people as much as she can.

“It is so prevalent and it’s just ordinary Aussies that are employees, and they’re wondering, ‘Why the hell? What’s going on?’”

Looking at the comments on some of Ms Raso’s videos, you can see just how many people are struggling with tax bills this year.

“My estimate says a $1.9k debt. Can’t work out for the life of me why, there’s no way I can pay that,” one person said.

Another commenter said they got a $1500 bill despite having the same job as previous years where they received refunds.

“Nothing has changed. I made a bit more money this year worked more. But how do I get $1000 returned last year, and now I owe $1500?” they asked.

Another said: “I have two jobs only claim tax free threshold on one and now I owe $1800!”

A quick scroll on TikTok will also show dozens of videos of young people expressing lament after their dreams of a healthy tax refund were dashed.

One user, Kenneth, said he spent “five hours, 47 tabs, three breakdowns doing (my) tax return, just to find out I owe $4000 to the ATO”.

In the caption of the video he added: “The only return I got was emotional damage.”

This young worker copped a $4000 bill. Picture: @kenth2202/TikTok

Lots of young workers have been lamenting about owing the ATO money. Picture: @korayorkmen/TikTok

Another young worker shared an image showing she owed almost $5800 to the ATO, asking “wtf is this” and “no one speak to me”.

A nurse made a video revealing his $3404 debt, while another TikToker, Elaya, was hit with a $1733 bill.

Another user revealed they owed close to $9000, writing, “Any accountants wanna help me?”

Ms Raso said there are a few main reasons people are copping debts this year, with one of the key culprits being the rise in people taking on multiple jobs.

Australian residents are entitled to the tax-free threshold, which means you pay no tax on the first $18,200 of your income. However, it can only be claimed for one job, and for any additional jobs Aussies must inform their employer they will not be claiming the threshold.

But the accountant warned that for people with multiple jobs, this is often not enough to avoid being hit with a tax bill at the end of the financial year.

People have been less than impressed after submitting their tax returns this year. Picture: @fitzyyy__/TikTok

This worker was hit with a more than $1700 bill. Picture: @elaya.yang/TikTok

“If your main job is earning $45,000 or more per year, when you tell that employer at your second job that you don’t want to claim the tax free threshold, you go to that first tax rate, which is sitting at 16 per cent plus Medicare levy, that automatically defaults to that,” Ms Raso explained.

“So the employee has done the right thing, the employer has done the right thing, but if you’re earning $45,000 or above in that main job, you’re already sitting at 30 per cent tax rate, plus 2 per cent Medicare levy, so straight up, you’ve got a 14 per cent difference.”

Ms Raso said this hasn’t been as significant an issue previously, because fewer people were working multiple jobs and there was the buffer of the low and middle income tax offset.

The tax agent sees thousands of people a year and says she is having conversations on this subject almost every day.

She said it is “distressing” when people are having to get second or third jobs just to get by and they think they are doing the right thing in terms of their tax, only to be hit with a bill.

“No one’s done anything wrong, but there is no option for them to actually get that extra tax withheld,” Ms Raso said.

“For most people, our tax system is complicated enough. If they have to go and manually work out another 14 or 15 per cent, that’s unfair.”

Another common issue has to do with HECS-HELP debt.

The repayment income threshold is currently sitting at $56,156, meaning you’ll only start seeing payments come out of your pay if your salary ticks over that amount.

But, if you are earning under the threshold for both jobs, then neither employer will be withholding those repayments.

However, the ATO looks at your total taxable income, so if your combined income is above the threshold and you haven’t been making repayments, you are going to be hit with a debt.

Another situation Ms Raso sees revolves around salary sacrifice, novated leasing and reportable fringe benefits.

She said many people don’t realise that those reportable fringe benefits get grossed up by 1.88 times, which is going to impact how your HECS-HELP repayments are calculated, with them being repaid at a higher rate.

Ms Raso said those are the three main reasons for tax bills she sees every year, and warned people who cop a debt this year are likely to find themselves in the same situation next year, unless they figure out why.

“If it’s not addressed, the same thing is going to happen next year. And if you’re one of the people that go may not have had a tax debt this year, but have gotten a second job, you’ll end up in that situation next year,” she said.

Originally published as ‘Never that high’: Why so many Aussies have a tax debt this year