• 24 May, 2024

Tax Refund Dropping? Here’s What Could Be Causing It”

Filing your tax return can be stressful, especially when you expect a refund and it ends up being lower than anticipated. At Workpaper Accounting Services, we speak with hundreds of clients each year who ask the same question: “Why has my tax refund gone down?”

While there isn’t a single reason for a reduced refund, several common factors may be affecting yours. Understanding these can help you plan better and potentially increase your refund in the future.

8 Common Reasons Your Tax Refund Has Dropped

1. The Low- and Middle-Income Tax Offset (LMITO) Is Gone

The LMITO boosted refunds for low-to-middle-income earners between 2019 and 2023. Since this offset no longer applies, many taxpayers notice a reduction in their refunds—sometimes by as much as $1,000. To offset this, make sure you claim all eligible deductions and keep proper proof of expenses.

2. Double-Claiming the Tax-Free Threshold

If you’ve recently changed jobs and claimed the tax-free threshold from both your old and new employer, your refund can drop. The best approach is to claim the tax-free threshold only from the job with the highest income.

3. Employer Issues Affecting Tax Withholding

Sometimes, your employer may withhold less tax than required. Even a small weekly difference can accumulate over the year, reducing your refund. Check your pay slips and request adjustments if necessary.

4. Freelance, Sole Trader, or Side Income

Income earned outside a regular job—like freelancing, side gigs, or as a sole trader—is not taxed at source. When filing your return, you must pay tax on this income, which can lower your refund. Setting aside 30–40% of your side income for tax is a good strategy.

5. Increase in Your Income

Higher income can push you into a higher tax bracket, naturally reducing your refund. Make sure you maximize deductions and consider asking your employer to withhold more tax if needed.

6. Existing Government Agency Debts

If you owe money to agencies such as the Family Assistance Office, your refund may be claimed to settle those debts. Clear any outstanding obligations to avoid surprises.

7. Outstanding ATO Debts

Similarly, if you have unpaid amounts with the ATO, they can be deducted from your refund—even if you’re on a payment plan. Paying these debts ensures you receive the full refund.

8. Simple Tax Return Mistakes

Forgetting to include income like bank interest or additional earnings can reduce your refund. Double-check all income sources or consult a tax professional to avoid mistakes.

What To Do If Your Refund Is Lower Than Expected

1. Review your tax return thoroughly and compare it to your financial records.
2. Seek professional advice if discrepancies arise. At Workpaper Accounting Services, we offer a free assessment service to review your return and advise on corrections.
3. If eligible deductions were missed or errors were made, we can help file an amendment to ensure you get the correct refund.

How To Maximize Your Tax Refund

• Claim all eligible deductions and maintain proof.
• Avoid double-claiming the tax-free threshold.
• Ensure correct tax withholding with your employer.
• Set aside tax for side income.
• Track all income and expenses diligently.

Many taxpayers miss deductions for home office expenses, super contributions, education costs, and financial advice fees—all of which could boost your refund.

Need Expert Help?

At Workpaper Accounting Services, we make tax returns simple and ensure you get the maximum refund you’re entitled to. Contact us today:

📞 Phone: 0485 825 915
📧 Email: info@workpaper.com.au

📍 Address: 7 Bridge St, Werribee, Victoria 3030, Australia
🌐 Website: https://workpaper.com.au/

Let our experts review your tax return and help you avoid costly mistakes. Maximise your refund with Workpaper Accounting Services today!