Why is my tax return so little?

Tax refund amounts can be an exciting event. While some could receive large sums others may be receiving little to no refund and possibly owe.  There are a couple of main reasons that people are not receiving the refund they think they should be getting. The following are possible reasons.

An important thing to understand when examining your tax refund is how the whole process works. Here is a general overview: Over the course of a year, you earn an income. Based on that income, you are then taxed a certain amount on a sliding scale. This covers both your medical levy as well as your tax. When you lodge your tax returns the ATO looks at the amount you have paid, versus the amount you should have paid, that difference is what your refund is. In the case that your deductions were not taken adequately, your refund will then be lowered or you could potentially owe.

One of the biggest culprits to a lower tax refund is incorrectly filling out your Tax File Number Declaration with your employer. In the case that you have two jobs, you can only claim the tax free threshold on one of your jobs. This is where a lot of people go wrong. By checking this box on both of your incomes, you will be paying less than what you should on the second job. Once the financial year-ends and you lodge your taxes, the ATO will recognize this and deduct what you should have paid in taxes, from the refund. This is a common reason why your tax refund may be low.

Another common cause of a low tax refund is that you have outstanding loans with Higher Education Contribution Scheme (HECS), now known as Higher Education Loan Programme (HELP).  The government set’s a yearly income level that once reached, you begin to repay your loans. The income level for 2016 is $54,126. It is important to acknowledge and to be aware of the yearly income level and let your employer know if you took advantage of the HELP loan. This is also done on the TFN Declaration that you fill out when you start a new job. By doing this, you will avoid the deductions coming out of your tax refund.

There are several other factors that can lead into why your tax refund is lower. If you have gone through a tax agent, you can correspond with them and get a better idea of your situation, possibly by ensuring you keep the correct records. You can then plan for the following year to increase your tax refund. It is important to be informed of possible deductions and also ensure that you only claim deductions you are legally entitled to in order to avoid costly fines.