The introduction of the government’s $1,080 low and middle-income tax offset has done little to lift tax refunds, with the spike in self-lodging taxpayers linked to the meagre increase.
Despite the government’s doubled end-of-year tax offset of $1,080 for low and middle-income earners kicking in this year, average refund amounts have just risen to $2,800 from $2,379.
By the end of October, 4.4 million individual tax returns were lodged by self-preparers, up from 3.7 million from the year before.
Speaking to My Business sister platform Accountants Daily, H&R Block director of tax communications Mark Chapman said a combination of self-lodging and the ATO’s repeated warnings on work-related deductions have probably contributed to a lower than expected average refund amount.
“The ATO’s assertive messaging on work-related expenses has made many people think twice about claiming, even for things they are entitled to, especially where the claim is a large one,” Mr Chapman said.
“Add to that the desire to quickly get the new tax offset and the combination led many people to lodge early and through myTax, often making mistakes along the way, including failing to claim all the deductions they were entitled to.”
The spike in self-lodgers this year can also be attributed to the changes with Single Touch Payroll reporting, with income statements replacing end-of-year payment summaries and being made accessible through a taxpayer’s myGov account or their tax agent.
“The design of the system this year was geared towards encouraging people into myTax,” Mr Chapman said.
“There were no payment summaries this year so employees had to log into myGov to download income statements, whereupon they were presented with a big ‘lodge now’ icon, encouraging them into myTax.”
The value proposition
Mr Chapman believes the lower than an expected average refund amount presents an opportunity for accountants to push back against the shift towards myTax.
“The ATO will certainly do everything they can to encourage people into myTax by integrating myTax into the overall design of the system, so that for many it will be the default way of lodging,” he said.
“Our job as accountants is twofold: firstly, to push back against the ATO when they do that; and secondly, to sell our value proposition to clients — quite simply, if you want to make sure your return is correct and that you’re claiming everything you’re entitled to, only an agent-lodged return will give you that assurance.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.