Why is my tax refund lower this year?

If there’s one question I’m expecting to get a long this year, it’s that question - ‘why is my tax refund so much lower this year?’

It’s understandable - for the last few years, you may have received a refund of about $1,000, perhaps more - but whatever value it is, if you earn between $37,000 and $126,000 your refund is probably lower this year than it has been the last few years. If you’re unlucky, it may even be a tax payable!

I promise, the reason isn’t ‘because Jen, the accountant, is suddenly crap at their job’.

What happened is this is the first financial year in a while where the Low and Middle Income Tax Offset isn’t in place - it has ended.

WHAT HAPPENED - THE START

The Low and Middle Income Tax Offset - otherwise known as the LMITO and colloquially known as the ‘Lamington Offset’ (insert cute picture of a lamington), was originally introduced in the 2019 financial year (that’s 4 tax returns with this offset - no wonder you got used to it!).

The offset was originally introduced to ‘bring forward’ a tax cut. Back in 2018 (that’s pre-COVID) legislation was passed to change the 19% tax bracket from $37,000 to $45,000 - but only from the 2021 financial year onwards. The offset was introduced so that the dollar value benefit of that ‘tax cut’ was essentially given to taxpayers from the 2019 financial year onwards (that’s two years early).

It was introduced to be a ‘tax return only’ offset, so you didn’t see any change in your pay packet - you just got a bonus of up to $1,080 when you lodged your tax return.

WHAT HAPPENED - THE EXTENSION

Two years later in the 2021 financial year, the tax brackets actually changed, so everyone now received a few extra dollars in their pay packet each fortnight - but now COVID was a huge thing, and suddenly giving extra cash to your taxpayers to boost the economy was the thing to do. The offset was extended for the 2021 financial year, and you not only got a week-to-week tax cut, you also got a tax return bonus of $1,080. Essentially you got the tax cut twice over, and the offset went from being a shift in the timing of the tax cut to being a genuine ‘gift’ of just over $1,000.

WHAT HAPPENED - THE ENDING

Cut to March 2022 and the Morrison government handing down their pre-election budget.

They said hey, the economy is starting to shift, and we can’t keep throwing money around forever. BUT we’ll give you one last offset on your 2022 tax return, AND we’ll up it to $1,500. Legislation was passed before the election, and this legislation boosted the offset as a one-off final payment of $1,500 in the 2022 financial year (that’s last year), and then ended the offset, so that it would not apply in the 2023 financial year (that’s where we are now).

WHAT’S HAPPENING - THE AFTERMATH

The current government has elected not to reintroduce the offset (but remember, it was already legislated to end this financial year by the previous government).

What this means is that for the last four years, you’ve probably become used to seeing a nice healthy refund of perhaps $1,000 or more. Now, the cost of living is high and you might have been relying on that refund which you’ve started to think of as ‘your standard refund’ - but unfortunately it was only ever a temporary, ‘gift’ refund.

For more than a year, the writing has been on the wall - no offset this year. It was around just long enough for you to get used to it! Now, unfortunately, you need to get used to life without it.

WHAT’S THE WORST THAT CAN HAPPEN?

If you’re unlucky, or if you have slightly more complicated tax affairs (eg a HECS debt, multiple jobs, high income without private hospital cover etc) you may even be looking at a tax payable.

For many people, the offset over the last few years has been a bit of a ‘saviour’ - pulling people out of a tax payable hole and into a refund instead. Without that safety net, you may need to pay the ATO instead of vice versa!

If that’s the case for you this year, I will do my best to give you a more detailed breakdown of ‘where the payable comes from’ so that if there are any changes you can make to improve your tax position, we can make sure you’re working on those. The specifics of this change for each person, so what works for someone else may not work for you.

WHAT’S ONE THING I CAN DO RIGHT NOW?

One of the best ways to guarantee yourself a decent tax refund is to get your employer to take extra tax out of your pay. This effectively builds you up your own tax buffer - think of it as a forced savings plan (this isn’t financial advice, btw).

If you get paid weekly, and you ask your employer to take an extra $20/week of tax out of your pay, by the end of the year you will have paid an extra $1,040 in tax. (The equivalent would be $40/fortnight or $85/month if you’re paid on those cycles).

At the end of the year that extra tax gets brought into your calculations, and it becomes like your own self-made Lamington Offset! This means even if you have complications like the ones above, you’ll hopefully cover any little tax payables, and you’ll be more likely to end up with a decent tax refund instead!

Baby spam, life, and pricing update

What a difference six months makes!

Life sure has changed in the Heath-Creevey household in the last year (and especially in the last 6 months)!

Little Charlie (Charlotte) continues to make us incredibly happy - she’s currently 6 months old (as of June 2023) and is a smiling bean of joy who can roll over, plank like a pro and is desperately trying to figure out crawling.

She is also an incredibly time-consuming part of life (which is to be expected). From August 2023 onwards, I will not be working on Tuesdays as that will be my care day for her once Kate returns to work.

Hat day!

Kate and I are also each embarking on some studies - I am starting a Bachelor of Computer Science, and Kate is studying a Post Graduate Certificate in Digital Transformation (which I can barely understand the name of, let alone the content). To say that we’ll be busy is an understatement!

PRICING UPDATE

Overall, my time is going to be a scarce commodity, and I have continued and am continuing to increase my skills both in accounting and more broadly, with a view to providing extremely high quality services which go above and beyond the standard tax experience. You can be assured that your information is thoroughly reviewed and accurately completed when you come to Blue Ribbon Accounting.

In particular for the 2023 year, the ATO published a major change in the approach to Home Office deductions partway through the financial year, with backdated application to 1 July 2022. I have spent significant time understanding the new approach, and updating the Blue Ribbon checklists and info sheet to ensure that you can continue to meet record keeping requirements and provide me with the information I need to optimise your tax position.

Chilling with mum

I continue to remain committed to a simple pricing structure which does not punish a person for minor ‘complexities’ in their tax return, such as holding multiple jobs across a year, holding minor investments, or having more expenses or deductions than usual.

Rather than charging ‘by the line’, I continue to price my services based on the level of complexity of the tax return form - whether it is a standard salary and wages return, or whether it includes a small business, rental property, or more significant investments or capital gains.

In terms of non-individual businesses, I have made major improvements in the last few years in the quality of the reporting and information which is prepared for these lodgements, including preparing Annual Accounts for the vast majority of entities.

When taking into account the scarcity and value of my time in order to provide quality services, inflation over the past 12-18 months, and the current market value of tax return and accounting services, the following pricing will apply from 1 July 2023:

• Individual Tax Returns - $165 each

• Tax Return add-ons - $82.50 each

• Non-individual Small Business Annual Accounts and Tax Returns - $495 combined price (generally annual accounts will be required in most circumstances)

• General hourly rate $165 for large jobs and advisory work

• BAS lodgement minimum charge $93.50

• Bookkeeping hourly rate $93.50

These rates continue to reflect the value and quality of my services and are comparable to ‘big box’ brands, however with a much more personal service at each appointment and across our ongoing relationship. These rates also continue to encompass the occasional ‘quick question’ (many of which are not very quick, unfortunately!).

The team and I look forward to working with you over the next year!

WE'RE EXPECTING! Annual update - and pricing update

Seems these days I’m only ever writing an annual update blog post. A lot has happened since this time last year!

First of all, in June 2021, I married my most amazing Kate in the beautiful surrounds of Numinbah Valley. We managed to have the wedding in the small window of time when my dad and step-mum could make it across from New Zealand (though we lost a few friends to a Melbourne lockdown).

Following the wedding, we zipped off to Tasmania for a fabulous couple of weeks, including the most picturesque day that I think Cradle Mountain has ever experienced (pictured - yes, that’s my photo, not a stock photo).

In late 2021, I applied for and was granted both CPA membership personally, and a Public Practice Certificate for Blue Ribbon Accounting. These additional memberships and registrations give you assurance that we are operating under stringent quality standards, and also that I am continually working to maintain and improve my accounting knowledge to better serve my clients.

If that wasn’t enough, in the first two months of 2022, Kate completed a full round of IVF, and we bought a townhouse in Camp Hill (local to the office!). It turns out Kate is an over-achiever in every aspect of life, and we ended up with NINE embryos in the freezer at the end of the IVF round.

While our first implant didn’t take, the second one stuck, and WE ARE EXPECTING!

Eggnatius Heath-Creevey (Eggy for short - gotta have a foetus name) is due on 28 December 2022, but might arrive a little bit earlier.

With all of these changes occurring, I’ve taken the time to assess my business practices and ensure that I’m maximising my effective time and my service offering. I will be steering away from ‘in home’ appointments and appointments that require travel away from my office, so that I can ensure that I serve as many clients as possible before Eggy’s arrival, and continue to work efficiently after Eggy’s arrival.

I appreciate your efforts in working with my team to ensure that I can establish an excellent work and family balance from the very beginning.

PRICING UPDATE

I have endeavoured with this update to balance continuing to provide well priced services with the ongoing increases in the cost of living, and with the steps Blue Ribbon Accounting have taken in the past 12 months to improve their service offering quality through professional memberships.

Items on the pricing page now reflect new pricing which will apply from 1 July 2022.

Broadly, prices have increased by approximately 8%, with a basic summary of increases below:

• Individual Tax Returns - $143 each

• Tax Return add-ons - $71.50 each

• Separated pricing for small business tax returns vs preparation of financial reports (now each at $214.50)

• General hourly rate $143 for large jobs and advisory work

• BAS lodgement minimum charge $82.50 (bookkeeping rate remains at $77)

Meet the team, and pricing changes

Hey folks! It’s been a long time since any sort of blog post from me here at Blue Ribbon Accounting. I thought I’d provide an update on what’s been happening within the business.

Office Manager Jacqui

Since mid-2018, I’ve been studying subjects to complete the CPA Australia qualifications - 7 separate subjects in total. In the second half of this year, I hope to be announcing my CPA Australia membership, which will provide additional resources and education and development opportunities to ensure I continue to serve you all with tip-top service.

From July 2019 to Feb 2020, I was joined by a part-time trainee bookkeeper Kallista, who moved onto a full time role at Xero in their sales and onboarding team (where she’s absolutely excelling, as a side note).

Since late April 2020, I’ve had a part-time office manager, Jacqui, who keeps my e-mails and calendar in a functional state as well as completing invoicing and data entry works and many other jobs besides!

Tax contractor Jean

Finally, commencing in July 2021, I’ll have a casual tax return contractor! Jean has worked as a tax casual for several years at H&R Block, moving up to de facto 2IC of her branch due to her work ethic and diligence. If Jean drafts your tax return this year, I can almost guarantee she’ll do an even better job than I do - and in addition, I of course complete thorough reviews of all returns lodged through my business.

If you think there’s some family resemblance between Jacqui, Jean and me - you’re right! I’ve managed to build a real ‘family business’, with my sister the Office Manager, and my mum the tax contractor joining my team.

I’m incredibly proud to introduce you to the team, and I thank you all for your loyalty that’s enabled me to grow the business to this point!

PRICING INCREASES

It has been three years since I have increased prices in any way, and as I outlined above, it’s been a huge three years!

Effective 1 July 2021, I will be applying approximately a 20% increase to prices across the board. Items on the pricing page will be updated in late June to reflect this, but I have also provided a basic summary below:

• Bookkeeping - $77 minimum charge, with standard hourly rate at $77

• Individual tax return (base level) - $132 per return

• Add-ons for individual returns - $66 per add on

• Small business/non-individual tax returns - $198 minimum charge

• Hourly rate for large returns - $132

• Advisory services - from $132-198 per hour depending on complexity of advice