Last year, many Australians were confused by the “low and middle-income tax offset”. The good news is that not only was it extended to FY 2019/20 but that it will also be available for FY 2020/21.

In case you’re confused by the concept or your circumstances have changed, we’re providing an update on this popular tax offset and what you need to do about it.


What is the Middle Income Tax Offset?

Calculated based on your taxable income, the offset is applied to the amount of tax you owe. Essentially it works to reduce your tax bill. It is not a “refund” in the sense that it cannot reduce your tax owing to less than $0.


How does it work?

Once you have lodged your tax return, your tax payable is calculated based on your taxable income. If your taxable income falls within a certain amount, the tax offset (all or part) will be applied to your tax return and you’ll be required to pay less tax (if any).

For example, if your tax return indicates a tax payable amount of $1000 and you are eligible to receive the full $1080 middle-income tax offset, this will reduce your tax payable to $0 and you will not pay tax this year.


Am I eligible?

As part of lodging your tax return, you may be eligible for both the low-income tax offset and the low and middle-income tax offset.

Keep in mind that you are only required to pay tax if you earn $18,201 or more. If you earn less than this and have paid tax, you will generally receive all your tax back (and it, therefore, cannot be offset).

If you earn more than this, your tax payable is calculated based on your taxable income and the offset is then applied.

Note again that depending on your income, you may be eligible for both of the offset categories.


 

How do I apply for the tax offset?

This is possibly the best part: there’s nothing specific you need to do. It will be considered automatically as part of your tax return when you lodge it. The offset is simply calculated based on your taxable income and applied to your tax payable.

So if there’s one thing you need to do, it’s lodge your tax return!

If you have any questions at all, do not hesitate to contact our team of professionals on 07 5593 6060 as we are here to help you.

As you may already be aware, as of July 2019, there was a new tax offset available to middle-income earners. This means that people earning an income within a certain range may have been eligible to have their tax reduced by a specific amount. What does this mean for you, and by what amount? Read on for more details.


The basics 

This new tax offset applied from July 2019 to middle-income earners in Australia. The aim was to increase take-home pay and is applied from the financial year 2018-19, for four years. Additional changes will be introduced over three stages until 0% tax will apply for those earning less than $41,000 per year.


How does the tax offset affect you?

It is important to understand the difference between “offsetting our tax” and “getting a tax return”. The introduction of the tax offset doesn’t necessarily mean you were owed a tax refund or received any money back.

What it does mean (for those within the applicable income range) is a reduction in the tax you may have been due to pay.

Let’s assume your income is between $48k-$90k. Your tax offset amount is $1,080 (the amount is determined by your income). Without the offset, you may have been due to pay a tax bill of $2,000 (as per your tax return). Because of the introduction of the tax offset, this tax bill was reduced by $1,080 (the “offset”) so your final tax amount was $2000 – $1,080 = $920.

Also, note that the offset applies whether or not you’ve already lodged your tax for 2018-19. If you haven’t yet lodged, the offset will automatically be applied where appropriate (you don’t need to do anything extra to ‘claim’ the offset). If you had already lodged your tax for 2018-19 before the introduction of the offset, the offset may mean you were due a refund – if you paid too much tax. This would apply if you lodged your 2018-19 tax return before July 4, 2019.


What’s next?

We know these types of changes can be confusing (and in this case, the ATO was inundated with calls from people believing they were due $1,080). If you want to talk through your personal situation and discuss how it might affect your tax, give us a call. 

We love working through these situations with our clients and you may be entitled to a larger refund than you were expecting.

Still need to lodge your 2014 Income Tax Return? Join many other clients and be provided with Quality – Mobile, Afterhours & Weekend Tax Preparation Services.

Call us today – (07) 5535 0767 or 0404 935 495

There is still time to lodge without potentially being penalised by the ATO. If you lodge through a registered Tax Agent, you generally receive an extension until 15 May 2015. So please allow us to assist you to professionally & accurately prepare your 2014 Income Tax Returns prior to the 15 May 2015 deadline. The price to have your Income Tax Return prepared by a Chartered Accountant is $120.00 (including GST).

We have extensive knowledge and tools to prepare salary & wage or investment based income tax returns, ensuring the appropriate deductions are claimed and documented to protect you from the risk of audit.

Not too sure what you need to prepare or provide to us?

Would you like to know more?

I encourage you to contact me on 0404 935 495, chris@qcaccountants.com.au or the below contact form for a further discussion about your personal situation.

Salary & Wage Earners 

We will professionally prepare your tax lodgments

However we are keen to empower our customers with more information on their Income Tax obligations – as we recognise many of our customers are interested to know what they can and cannot claim as a tax deduction.

The below is a handy guide, that lists what the ATO consider to be acceptable deductions for specific industries.

https://ato.gov.au/occupations

Please note that we search for every possible tax deduction to ensure you receive everything you are entitled too.

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