Hidden trap in $1080 tax refund
A record number of Australian taxpayers are lodging their returns, eager to get their hands on the government's much-hyped new $1080 tax offset.
But despite being promised a hefty estimate by myTax, some people are finding the refund never even hits their bank account.
Instead, the Australian Taxation Office is diverting that money straight to the Department of Human Services to pay off Centrelink or child support debts the taxpayer may not even know they have.
"Unfortunately for taxpayers, this information is normally not known until they receive their notice from the ATO that their return has been processed," said Michelle Maynard, partner at accounting firm Carbon Group.
The problem is government support payments generally require the family to estimate their taxable income for the year ahead, and if they earn more than they expected, the government will calculate how much has been overpaid.
"You can revise it as the year goes on but a lot of people don't, they just set and forget," Ms Maynard said.
Because myGov doesn't tell the taxpayer they have debt when they complete their return, some people banking on the refund shown in their estimate have been caught out.
"I've had a couple of people this year already surprised by this," she said.
"A lot of people spend that money before they get it. You get your notice of assessment saying this has been forwarded to the Department of Human Services, and only then a few weeks later you get a letter from Centrelink."
While it's too late this tax time to do anything about it, Ms Maynard said going forward it was important to check in regularly to ensure your income is in line with what you told the government at the start of the year.
"You may have gotten a pay rise or done a lot of overtime," she said. "Make sure you're being proactive and keeping in contact with Centrelink so they can adjust your payments."
Ms Maynard reiterated that the $1080 was not a cash top-up payment, as many people incorrectly have been led to believe, but a tax offset.
"We've had an influx of people coming in early this year because that's the big focus," she said. "There are definitely a lot of misconceptions. People think it's like the Kevin Rudd payment, we all just get it into our bank account, but it's not. It's a non-refundable tax offset."
That means it is part of your tax refund, if you are getting one. Whatever is shown on your final estimate includes the $1080 - there's no additional cash bonus coming.
Also, "everybody thinks they're getting $1080, which is not true". The amount is based on your income. Only people earning between $48,000 and $90,000 get the full $1080, and it tapers off on either side.
"If you don't have any tax to pay or it brings it down to nil, you don't get a refund of the excess," Ms Maynard said.
Last week, an ATO spokeswoman said tax refunds would be paid into a taxpayer's nominated bank account within one to two weeks after lodging.
"We want to reassure taxpayers that we'll automatically process any tax cut you're owed from the low and middle income tax offset changes," she said.
"You don't have to do anything, just lodge online or through your tax agent as usual. For returns lodged from July 1, 2019, taxpayers' refunds include any amount of the low and middle income tax offset that they are entitled to. There is no delay in processing the offset as part of people's return."
But the spokeswoman stressed an offset was "not an automatic refund", and it would either result in a larger tax refund than normal or a smaller debt than would otherwise have been payable.
"Tax offsets reduce the amount of tax you pay on your taxable income," she said. "The low and middle income tax offset is a non-refundable offset, which means any unused offset amount itself cannot be refunded or reduce the Medicare Levy."
The ATO has already issued more than 2.3 million individual 2019 income tax refunds with a total value of more than $5.6 billion.
The spokeswoman also said the amount of the offset and any refund taxpayers may be entitled to would differ for everyone "depending individual circumstances such as income level and how much tax was paid throughout the year".