Well, it’s that time of year again! And as you have no doubt heard in the media, the usual post-30 June rush of individual tax returns being lodged has been well and truly out-done this year. A record 650,000 people lodged their returns in the first week of July, many of them expecting a juicy tax refund as a result of the new Low and Middle Income Tax Offset. But that’s not the only change for individuals lodging their 2019 tax returns. Below, we outline the most relevant changes every individual should be aware of.
Why didn’t I receive a PAYG Payment Summary from my employer?
Employees will be used to receiving a PAYG Payment Summary (sometimes referred to as a “group certificate”) from their employer(s) soon after the end of the financial year. This summary includes the total wages earned from the employer during the year, the total tax withheld from that income and various other amounts to be reported in their individual tax return.
Following the introduction of Single Touch Payroll (“STP”), employees will no longer receive PAYG Payment Summaries each year. Instead, under the STP system, employers will report detailed wages, tax withheld and other information to the ATO throughout the year. Instead of providing a payment summary at the end of the year, employees will be able to access an “Income Statement” (being a summary of their income from each employer) on ATO Online Services via their MyGov account or by contacting the ATO. If you use a tax agent (like Catalyst) to lodge your tax return, you don’t necessarily need to view your Income Statement as tax agents can access this information directly via the ATO, however you may wish to review the statement to ensure it is accurate.
Because STP is new, we’re still in a transitional period and some employers may not yet be using STP reporting. Therefore, you may still have received a PAYG Payment Summary from your employer for the 2019 year.
Why didn’t I receive a statement from my Private Health Insurance provider?
Due to changes in the law surrounding how registered health insurers provide information to members, it is now optional for insurers to provide you with a private health insurance statement. However, insurers are still required to report the information that would normally be on your statement to the ATO, so your tax agent will be able to access this information directly from the ATO. This will normally happen by the middle of August.
If you would still like a copy of your statement, you can request one from your insurer.
When will I get the $1,080 tax refund everyone’s talking about?
Although everyone’s talking about the so called “grand in the hand”, there is a lot of confusion among taxpayers about what they will really be getting. The crux of it is:
- The amount of offset you receive depends on your income level; and
- You may not necessarily receive a refund, even if you are eligible for the offset.
There are two related tax offsets that affect your potential refund:
- Low Income tax offset (LITO); and
- Low and Middle Income tax offset (LMITO).
If you are an Australian tax resident, you may be eligible for one or both of the offsets, depending on your income.
| Taxable Income | LITO Amount | LMITO Amount | Maximum Potential Offset |
| Up to $37,000 | $445 | $255 | $700 |
| $37,001 – $48,000 | $445, less $0.015 for each dollar of income over $37,000 | $255, plus $0.075 for each dollar of income over $37,000 | $1,360 |
| $48,001 – $66,667 | $445, less $0.015 for each dollar of income over $37,000 | $1,080 | $1,360 |
| $66,668 – $90,000 | NIL | $1,080 | $1,080 |
| $90,000 – $126,000 | NIL | $1,080, less $0.03 for each dollar of income over $90,000 | $1,080 |
| Over $126,000 | NIL | NIL | NIL |
Someone earning $48,000 taxable income will receive the highest possible combined offset of $1,360.
It is important to note that being eligible for the offset(s) does not necessarily mean you will receive a refund. This is demonstrated in the simplified examples below.
| Example 1 | Example 2 | Example 3 | |
| Employed, no deductions | Employed, with deductions | Business income, no tax instalments paid | |
| Employment income | 70,000 | 70,000 | – |
| Business income | – | – | 70,000 |
| Less: Deductions | – | (2,000) | (2,000) |
| Taxable income | 70,000 | 68,000 | 68,000 |
| Gross tax | 14,297 | 13,647 | 13,647 |
| Medicare Levy | 1,400 | 1,360 | 1,360 |
| LITO + LMITO | (1,080) | (1,080) | (1,080) |
| PAYG Withheld | (15,697) | (15,697) | – |
| Tax payable / (refundable) | (1,080) | (1,770) | 13,927 |
As you can see above, in examples 1 and 2, tax has been withheld and paid by the employer so when the offset reduces the tax bill, some of the tax that was previously withheld is now refunded to the employee. The person in example 2 gets a larger refund as their deductions further reduced their tax bill.
In example 3, the person operated a business as a sole trader and did not pay any PAYG Income tax instalments for the year, so although they are eligible for the full LMITO, they will not get a refund and instead need to pay the balance of their tax for the year.
You don’t need to do anything in relation to the offsets other than lodge your 2019 tax return. The offset will be included in your tax calculation and any refund resulting from the offset(s) will be paid as part of your tax refund once your return is lodged and processed. Tax refunds are generally processed within 1 – 2 weeks of lodgement.
Is there anything else I should know?
Below are some additional changes affecting 2019 individual tax returns that you may not be aware of.
Change in tax brackets
From 1 July 2018 (the start of the 2019 tax year), the top income threshold of the 32.5% tax bracket was increased from $87,000 to $90,000. This means that any income you earn between $87,000 and $90,000 will be taxed at 32.5% plus Medicare levy, instead of 37% plus Medicare levy.
Line entry information to be lodged for deductions
In prior years, the ATO only received your totals for each deduction question in the tax return (ie. total Other work-related expenses and total Donations). From the 2019 tax return onwards, the ATO will receive the information in each line that makes up these totals. Consequently, it is more important than ever to ensure that the information you provide in relation to deductions is accurate and complete, and that you have correctly determined the proportion of expenditure that is related to earning your income.
Data matching for Cryptocurrency activities
In April 2019, the ATO announced that it will be collecting data from cryptocurrency “designated service providers” to identify individuals and businesses that have or may be engaged in buying, selling or transferring cryptocurrency. The purpose of this data matching is to ensure that taxpayers are including any assessable income derived from cryptocurrency transactions in their returns where appropriate, either as capital gains or business income. It is anticipated records relating to between 500,000 and 1 million individuals will be obtained.
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Are you unsure how the above changes will affect you? Need assistance preparing your 2019 tax return? Contact our team for more information!
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