Understanding Tax Refunds in Australia

Tax refunds occur when the tax you’ve paid throughout the year exceeds your actual tax liability. Several factors contribute to receiving a refund, including overpaid taxes, deductions, and offsets.

Why You Might Get a Tax Refund

1. Overpaid Tax

• Employers often withhold more tax than required, especially if your income changes during the year.

2. Deductions

• Claiming eligible deductions, such as work-related expenses or donations, reduces your taxable income and can result in a refund.

3. Tax Offsets

• Offsets like the Low and Middle Income Tax Offset (LMITO) directly reduce your tax payable, increasing the likelihood of a refund.

4. Extra Payments

• PAYG instalments or additional voluntary payments may exceed your final tax liability.

5. Government Payments

• Some benefits, like family tax credits, may be reconciled during the tax return process, leading to a refund.

The Cado Tax app calculates your expected refund in real time, factoring in deductions, offsets, and tax already paid.

To maximise your refund, ensure all eligible deductions and offsets are claimed. Check out our Maximising Your Tax Refund guide for tips.

FAQs

What happens if my employer withheld too much tax?

If your employer withheld too much tax, the excess will be refunded to you after your return is processed.

Can I still get a refund if I have unpaid debts?

The ATO may use your refund to offset any outstanding debts, such as HECS/HELP repayments or child support. Any remaining amount will be refunded to you.