We’ve all heard a lot in the media recently about the governments ‘cash’ refund for taxpayers who earn up to $126,000 in the 2019 financial year. It’s been so widely publicised it’s caused a flurry of tax return lodgements this financial year….so much so that the volume broke the tax office’s website a few days ago. It couldn’t cope with the bombardment of requests for refunds!
However, we’ve taken a look under the hood of how this ‘cash’ refund works and it’s not quite as generous as what the media makes out.
For a start, it’s not actually a ‘cash’ refund, it’s a tax offset. These are 2 completely different things. A cash refund would be similar to what the Rudd Government paid to eligible taxpayers back in the 2008 financial year as a way to stimulate the economy during the GFC. Whereas a tax offset can only reduce tax payable ie it’s not refundable.
By way of an example, let’s say your taxable income was $21,000. Tax to pay on this income would be $95. As you don’t earn over $37,000, you’re rebate entitlement is only $255. Therefore, the tax payable will be reduced to $nil and the balance of $160 of the unused rebate is not refundable.
The amount of rebate you’re entitled to is also dictated by your taxable income for the year.
If your taxable income:
- does not exceed $37,000, you will be entitled to an offset amount of $255 on your tax payable.
- exceeds $37,000 but is not more than $48,000, you will be entitled to an offset amount of $255, plus 7.5% of the excess above $37,000 to a maximum offset of $1,080 on your tax payable.
- exceeds $48,000 but is not more than $90,000, you will be entitled to the maximum offset amount of $1,080 on your tax payable.
- exceeds $90,000 but is not more than $126,000, you will be entitled to an offset amount $1,080 less 3% of your taxable income above $90,000
We are receiving many queries about how you will receive this rebate. When we prepare your tax returns, the refund or payable estimate we advise will include any rebate your entitled to. Therefore, it’s not something you need to apply for, but rather it’s included in our calculations for your tax payable/refund.