If you’ve just received your tax refund and it’s way lower than expected or worse, non-existent, you’re not alone. Every year, thousands of Australians scratch their heads wondering: “Why is my tax return so low?”
The reality is, there’s typically more than one explanation. Whether you’re an employee, casual worker, student, or self-employed, how much you receive back is based on the amount of tax withheld, what deductions you’re claiming, and what benefits or offsets you’re entitled to.
Let’s break down what could be causing your disappointing return and what you can do next year to make it better.
Your Tax Refund Isn’t “Bonus Money”
First, a reality check in a hurry.
A tax refund is not a gift, it’s simply the ATO returning money that was more than paid throughout the year. If your refund is small, it may just be that your employer withheld the correct amount of tax, and you didn’t overpay.
So, a minimal refund is not always a negative sign. But if you were hoping for more and feel surprised, continue reading.
1. You Didn’t Pay Enough Tax During the Year
If you were employed casually, changed job, or worked for more than one employer, you can easily underpay tax, particularly if each employer treated you as having just one source of income.
This is typical when:
- You didn’t mark “no tax-free threshold” on your second job
- You received more income than expected
- You got Centrelink payments in addition to work
Result? You may even owe at tax time, or receive a very small refund.
Solution for next year: Ensure that only one employer uses the tax-free threshold, and think about voluntary tax withholding if you’re getting Centrelink or other payments.
2. You Didn’t Claim Enough Deductions
Claiming work-related deductions can increase your refund only if valid and accurately documented.
Most miss out because they:
- Don’t keep receipts throughout the year
- Don’t know what’s deductible in their line of work
- Think small amounts aren’t worth claiming
Fix for next year: Carry a logbook, scan your receipts, and use the ATO’s myDeductions tool if necessary.
3. You Got Fewer Offsets or Rebates This Year
The ATO provides several tax offsets (also referred to as rebates) that can lower the amount you pay in tax. But these offsets are based on your income, whether you are eligible, and even sometimes your private health cover status.
If your income increased, or your situation changed, you could lose:
- Low and Middle Income Tax Offset (LMITO) – which ceased after 2021–22
- Low Income Tax Offset (LITO)
- Private health insurance rebate
- Seniors and pensioners tax offset
Solution for next year: Talk to your accountant about what offsets you can claim, or whether you’ve passed them based on income.
4. You Had Government Payments Which Are Assessed for Tax
Certain Centrelink payments are assessable and must be reported, such as:
- JobSeeker
- Youth Allowance (in certain circumstances)
- Austudy
If tax wasn’t withheld from these payments, your refund might be reduced, or you might be left with a bill to the ATO.
Solution for the following year: You can arrange to have tax withheld from Centrelink payments so that you won’t be surprised.
5. HECS/HELP or Study Debt Repayments Kicked In
In the event that your income exceeded the repayment threshold (about AUD$51,550), the ATO could automatically withhold some of your refund to pay off your student loan.
It’s not lost forever; it’s just being redirected to your HELP debt.
Fix for next year: Know the threshold and budget accordingly. It’s not a penalty—it just reduces your ending refund.
6. You Worked Fewer Hours or Earned Less This Year
Sometimes why your refund is lower is… you just made less money.
Less hours, less income, or time off can all result in:
- Less tax paid in the year
- Less deductions or offsets
- Less refund
Solution for next year: Record your year-to-year income and ensure expectations are aligned with reality.
7. Your Spouse’s Income Impacted Your Return
If your partner or you received family tax payments, child care allowances, or any other income-tested benefit, your household income may alter your refund or payment.
This particularly concerns if:
- Your partner’s income was not correctly reported
- You failed to revise your income estimate
Next year’s fix: Update your MyGov details and report all income correctly, particularly if things change during the year.
8. You Had Money Owed to the ATO or Another Govt Department
If you owed the ATO or another government agency (e.g., Centrelink) money from last year, they may deduct the amount of the debt from your current refund as repayment.
Fix for next year: Login to your ATO online account through MyGov to see if there is an outstanding balance.
Final Thoughts: Small Refund ≠ Tax Error
A small tax return can be disappointing, but it doesn’t necessarily mean something went awry. Sometimes it means everything worked out perfectly.
That being said, if you’re frequently surprised by your result or feel like you lost deductions, it’s worth going to see a tax agent or accountant.
They can:
- Assist in claiming what you’re owed
- Ensure you’re not underpaying in the course of the year
- Check whether you’re eligible for offsets or rebates
FAQs
I received less tax back this year than I did last year. Why?
You might have made more income, lost offset eligibility, or had fewer deductions.
Is a small tax refund necessarily bad?
Not always, it might mean your employer withheld what they should have, so there’s less to “refund.”
Can I still change my tax return if I overlooked deductions?
Yes. You can revise your tax return with the ATO or your accountant, typically within two years.
Will I always receive a tax refund?
No. Some individuals break even or even owe tax, depending on how much they paid during the year and their overall situation.
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