Millions to score bigger tax refunds

Jul 10, 2020

The coronavirus has sent millions of Australians into unemployment, and millions more into work-from-home arrangements, meaning there is a “reasonable expectation” that the average refund size will increase in 2020, H&R Block communications director Mark Chapman said.

“Last year, average refunds were just over $4,000 This figure was a big increase on previous years due to the low and middle income tax offset that provides a boost of up to $1,080 for those earning up to $126,000. In many cases, the offset flows through into a bigger refund,” he told Yahoo Finance. 

That offset is in play again this year, keeping refunds high. 

“In addition, millions of Australians either lost their job or had their working hours reduced due to COVID-19 from March. This means that their income for the final three or four months of the year will be substantially lower than expected, even taking into account JobKeeper and JobSeeker.”

And as employers would have deducted tax based on a belief that staff would be earning at full rates for the whole year, they would likely have over-deducted tax. This will flow into larger refunds. 

“In some cases, the opposite will happen. Low paid workers may have got a pay rise due to JobKeeper and that could cause them to have a tax liability this year or a lower refund but on balance, I expect that more people will have paid more tax than they needed to,” he said. 

“It’s not possible at the moment to quantify that because every taxpayer is different but I’d expect to see this year’s average refund increase by several hundred dollars.”

Mr Taxman principal Dr Adrian Raftery agreed. He said one of the few positives to come out of the pandemic will be greater relief at tax time for as many as 30 per cent of Australians. 

 But this won’t be the case for everyone: Raftery said there will be a group who will have a higher bill or smaller refund as they’re unable to claim as much on car and travel expenses. 

Similarly, taxpayers who made capital gains in the first seven months of the year or the last two months of the financial year may also see a smaller return. 

“People forget that the market reached record highs in January this year so they could have sold for a nice profit in the first seven months this year. There will also be some who bought at the depths of the stock market correction in March and again have made some nice gains from the buyback,” Raftery said.

“If you have made a capital gain this year but sitting onto some shares which have made a paper loss then maybe worthwhile selling some shares before 30 June and crystallise losses which can be used against any future gains.”

Accountancy Online director Kane Munro said the pandemic has changed many taxpayers’ circumstances in one way or another. 

“The ATO is expecting a huge spike in people claiming deductions for working from home or for protective items required for their job,” he said. 

But he called for caution when claiming these expenses: “Remember that Netflix, Foxtel, Stan, Binge, etc are all great to help stay sane but are not deductible.”

Original article published here on 10 July 2020 by Yahoo Finance.

comments-rhsLatest Comments

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    Post: Claiming car expenses

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    By: Mr Taxman at Sep 19, 2020 12:29AM

    Post: Claiming car expenses