Why is my 2023 tax refund so low?

By H&R Block 8 min read
Over 14 million tax returns will be lodged in Australia this year – and for many of these taxpayers the best part of the process is the possibility of getting a big refund. The average tax refund in 2022 for self-preparers was $2,576 and the average refund for tax agent clients was $3,550. In other words, tax agent clients got nearly $1,000 in additional refunds.

However, things have changed this year and many people will now receive significantly lower refunds than in previous tax years. If this includes you, you might want to know some of the reasons for this change and what you can do about it, now and in the future. 

Tax rules can shift from year to year, often due to political and social changes, and these variations can sometimes increase or decrease your potential refund. It’s important to stay on top of these changes, which is a key reason why it pays to make sure you get expert assistance when it comes to lodging your tax return. At H&R Block our experienced tax consultants know all the latest rules and changes, so they can help you get the maximum possible refund every time.  

Here we’ll answer the three biggest questions about tax returns this year:

Why is my tax refund this year lower than I expected?

There are several reasons why your tax return might be lower than you expected this year. 

One of the big ones is the discontinuation of the Low-Middle Income Tax Offset (LMITO), a scaled benefit that previously delivered a tax break of up to $1,500 to anyone with a taxable income of up to $126,000. This is the first time in several years this offset has not been available to taxpayers and it will make a difference of between $675 and $1500 to many tax returns.

Another significant change that will be felt by many taxpayers this year is a shift in the way deductions can be claimed by anyone working from home. The main change is that you can no longer use the 80c-per-hour “shortcut” method (that was temporarily introduced in 2020) or the old 52c per hour fixed rate and must instead use either the revised fixed rate method or the actual cost method to calculate deductions. The actual cost method remains the same, but the fixed rate method has changed to 67 cents per hour for each hour you work from home for a specific list of expenses (that is different to the old fixed rate) that includes electricity and gas usage, phone usage (mobile and home), internet usage, stationary, and computer consumables.

It’s worth noting that you can’t claim any addition deductions for these expenses if you use this method. For example, you can’t claim a separate deduction for using your mobile phone for work purposes as well as at home if you’re using the fixed rate method. Instead, you’ll have to choose the actual cost method.

Taxpayers must keep a complete record of all the hours they work from home with timesheets or a diary covering the period from 1 July 2022 to 28 February 2023. Taxpayers who don’t keep sufficient records from 1 March 2023 will not be able to claim the revised fixed rate. 

In addition to these complicated new rules, don’t forget there are also several other factors that are not new but could also impact your bottom line at tax time and are worth remembering. 

Many people have picked up extra work in recent times, ranging from an additional part-time gig to freelance work or other side hustles. This could include work like driving for Uber or doing deliveries, renting out your spare room on Airbnb or picking up some casual shifts on the weekend – and they all need to be included in your tax return and could impact your final refund amount. 

Also don’t forget that if you don’t currently have private health insurance, you might be required to pay a Medicare levy surcharge as part of your tax return. Plus, any outstanding student or government debts you might have could impact your final refund amount. 

Finally, one of the most common mistakes many people make when lodging their tax return is failing to claim tax deductions to which they are entitled. It’s easy to leave money on the table unnecessarily if you don’t know all the possible deductions you could be claiming, so it really pays to have expert advice at tax time from someone who knows what they’re doing, such as one of our friendly tax consultants here at H&R Block. 

What should I do if my tax return is lower than I expected?

The first thing you need to do is to closely review the tax return and double check whether it’s aligned with your expectations. If not, you need to take action. 

The best way to do this is to speak to an experienced tax professional, such as one of the knowledgeable tax consultants here at H&R Block. If you completed your tax return on your own using a service such as myTax or have lodged your return through another tax agent, then you can get a second opinion by using H&R Block’s FREE* second look assessment service, where we will review your return and provide you with advice on how to proceed. If you’re a current H&R Block client, you can approach your local office or call 13 23 25 to get immediate assistance and advice.

We’re here to help you get the best possible result and if there is indeed an issue with your return such as an error or missing deductions that should have been included, we will help you to lodge an amendment to make sure you get the correct result. 

How can I boost my tax refund next year?

Working with a trusted tax consultant is the number one way to make sure you get every dollar you’re entitled to at tax time this year and in the future. 

There are so many deductions that many people miss – such as the depreciation of home office furniture and computers, superannuation contributions, education expenses and fees for financial advice – so it really does pay to get someone in the know to help you complete your return and to make sure you have proof of purchase for everything you include. 

Our team here at H&R Block will make sure you get ALL the tax deductions you’re entitled to, which will help you to secure the maximum possible refund going forward.

Frequently Asked Questions:

The average tax refund for 2022 for self-preparers was $2,576 and the average refund for tax agent clients was $3,550. In other words, tax agent clients got nearly $1,000 in additional refunds. This is likely to be significantly lower for 2023.

Whether you receive a tax refund in 2023 and, if so, the amount you receive depends on numerous factors including the discontinuation of the Low-Middle Income Tax Offset (LMITO), whether you worked more than one job in the past year and whether you have any outstanding government debts.

The best way to verify your return is to get advice from an experienced tax professional, such as one of the consultants at H&R Block. We offer a FREE* second look assessment service that will help you to identify if any amendments are needed. 

You are no longer able to use the shortcut method to calculate any working from home expenses and must now use either the actual cost method (which is unchanged) or the revised fixed rate method (which has changed to a rate of 67 cents per hour for each hour you work from home, with a change also to the mix of items you can include).

You need to keep detailed records of all time spent working from home and all expenses incurred during that time. You should also work with a tax consultant to calculate these deductions to ensure that you correctly account for all possible expenses and get the maximum possible refund. 

It depends whether the items are tax deductible for someone in your line of work. To check this, you should consult one of our tax professionals here at H&R Block.

First, consult one of our tax professionals at H&R Block to identify specific issues, errors or missing deductions in your tax return. Once this has been done, we can help you to lodge an amendment to your return

*FREE Second Look Assessment is available at participating offices only. Offices not included in the $0* second look promotion include Berri (SA), Griffith (NSW), Hornsby (NSW) & Miranda (NSW). Fees apply for corrected and amended returns.

Book an appointment online today

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