How the 2019-20 Federal Budget tax relief (offset) will affect your 2019 tax refund - for individuals

By David Goodwin, Accountant | Tax Returns, Taxation, Individual Tax Returns |


The very short answer is: Your refund will be bigger. If, that is, you earn under $126,000 and all else remains the same. 

But of course, there are no short answers when it comes to Australian tax!


An explanation of the new tax refunds

During the recent federal election Scott Morrison promised Australia lower taxes for individuals. This created immediate tax relief for low- and middle-income earners, meaning that for some individuals they could receive a refund of up to $1,080.

The “Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019” was probably drafted largely to help win the 2019 federal election. Now that the LNP has won that election, they are hoping that injecting some cash into people’s pockets will help kickstart a stuttering economy. Just like Kevin 07’s $900 cash giveaway in 2009 – but will you get enough to buy a 48inch or 65inch TV?


How the ATO calculates your tax return

During the year, most Australians pay tax in advance to the ATO. This is either through PAYG Instalments or via employers withholding from salaries. This amount is based on an estimate of your actual tax liability and doesn’t affect how much tax you will actually pay. When your actual tax payable is calculated (by entering all of your income and deductions into your tax return) the ATO will send you a refund if you have pre-paid them too much, or a bill if you haven’t paid enough. An offset is subtracted directly from your tax payable. This is why a bigger tax offset will mean a bigger tax refund or a smaller tax bill.


The expected 2019 tax rebate for each tax bracket

The table below shows that people earning between $48,000 and $90,000 will receive the maximum $1,080 offset, with the amounts decreasing for individuals earning more or less than this range:

Taxable income
2019 added tax rebate

Less than $37,000

$255

Between $37,000 and $48,000

Between $255 and $1,080

Between $48,000 and $90,000

$1,080

Between $90,000 and $126,000

A portion of $1,080

Above $126,000

$0


So, while this means that individuals in this table will pay less tax this year, the refund amount will depend on how much tax was pre-paid to the ATO compared to the actual tax liability calculated on the tax return.


How to obtain your tax rebate

The good news is that individuals just need to lodge their tax return as normal as the change will automatically apply to your tax refund or tax bill.

If you’re unsure about any aspect of your tax return, consult your tax agent to help you get the best result.


Where to find more information

As with all things Australian tax, there could be many more pages written. A great summary of the Government’s planned tax changes can be found at www.budget.gov.au.

Written by David Goodwin, Accountant


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