Advertisement
Australia markets open in 6 hours 40 minutes
  • ALL ORDS

    8,262.40
    +56.30 (+0.69%)
     
  • AUD/USD

    0.6763
    -0.0023 (-0.34%)
     
  • ASX 200

    8,017.60
    +58.30 (+0.73%)
     
  • OIL

    81.89
    -0.32 (-0.39%)
     
  • GOLD

    2,432.30
    +11.60 (+0.48%)
     
  • Bitcoin AUD

    94,003.55
    +5,320.93 (+6.00%)
     
  • CMC Crypto 200

    1,317.01
    +48.06 (+3.79%)
     

Major tax warning over ‘massive’ refunds: ‘Nothing to boast about’

Are you getting a big tax refund this year? It’s not actually as good as you might think.

Belinda Raso tax
A tax expert explains why getting a big tax refund is actually a bad thing. (Source: Getty/TikTok)

Tax time is here and many Aussies are looking forward to getting their hands on a fat refund. While this would no doubt be welcome cash for many Aussies right now, tax experts say getting a “massive” refund isn’t as good as it seems.

That’s because your refund is just money you were entitled to in the first place. But instead of having that money in your hands and using it during the year, you’ve overpaid the Australian Taxation Office (ATO) and let them hold onto it until July.

Tax Invest Accounting director and registered tax agent Belinda Raso told Yahoo Finance a big tax refund was “not anything that should be boasted about”.

ADVERTISEMENT

RELATED

“At the end of the day the ATO has held onto that money for 12 months when you should have been earning 5 or 6 per cent interest on it,” Raso said.

“Even when people say, ‘Well, I’m not a great saver, this is better for me’ or ‘I don’t have HELP debt anymore and they’ve just withheld extra’.

“If you’re getting a $5,000 refund, think about how much you could have got in interest. Basically the ATO’s earnt that interest. It’s not a good thing.”

Do you have a story to share? Contact tamika.seeto@yahooinc.com

If you’d instead popped that $5,000 in a savings account with a 5.5 per cent interest rate, you would have earned $282 in compound interest in the last year.

Just under half of Aussies are expecting a tax refund this year, Finder research found, with the average person expecting a $1,288 cash boost.

Half of those said they would be putting their refund in savings, while a quarter would use it to pay household bills. Others said they would put the cash towards their mortgage or a holiday.

With the $1,500 Low and Middle Income Tax Offset (LMITO) now long gone, Raso said Aussies needed to “put the work in” if they wanted to get a refund this year.

“Unless you’ve got deductions, our tax system is not set up for us to get a refund,” Raso told Yahoo Finance.

“If your employer has withheld correctly, you won’t get a refund. Your refunds are based purely on deductions. So if you have none, you’re not going to get a refund.”

The ATO has occupation guides you can check to see what you can and can’t claim. H&R Block director of tax communications Mark Chapman has also written a handy guide to the best deductions available here.

Aussies can now lodge their tax returns for the 2023-24 financial year, but the ATO recommends people hold off a few weeks and wait until their information has been pre-filled.

Get the latest Yahoo Finance news - follow us on Facebook, LinkedIn and Instagram.