There may be stress during tax season. For ease of mind, learn how to file tax changes. When you get a tax offset, also known as a refund, the amount of tax you have to pay goes down. This could mean that you get a bigger return. Taxes aren’t taken out of your refund like they are from expenses. They instead cut the amount of tax you have to pay. To get the most money back, you need to know the right way to claim tax refunds. You can get tax breaks and a bigger gain by using these tips.
What is a Tax Offset?
A tax offset is a certain amount that lowers the total amount of tax you have to pay. This can sometimes lead to a bigger return. Say you owe $1,000 in taxes and are qualified for a $200 tax offset. This means that you only owe $800 in taxes. Tax offsets come in different ways, and who can get them depends on their income, age, and other personal circumstances.
1. Know Which Tax Offsets You’re Eligible For
The first step in claiming tax offset is understanding which ones apply to your situation. There are several types of tax offsets available in Australia, and each has different eligibility requirements. Here are a few of the most common ones:
- Low and Middle Income Tax Offset (LMITO): If you’re a low- to middle-income earner, this offset can offer a significant reduction in your tax bill. The amount depends on your income, with the highest benefit available for those earning between $48,000 and $90,000.
- Senior Australians Tax Offset (SAPTO): If you’re over 65, the SAPTO may reduce the tax you owe. The amount varies based on your income and whether you are a single person or part of a couple.
- Private Health Insurance Offset: If you have private health insurance, you might be eligible for a rebate, which could reduce your tax liability. This offset is income-tested and can vary based on your age and income level.
- Family Tax Benefit (FTB) Offsets: For families with children, the FTB offset can provide significant tax relief. The eligibility depends on your income, the number of children, and your family circumstances.
- Franking Credits: If you have investments in companies that pay dividends, franking credits (also known as dividend imputation) can help reduce your tax liability. These credits represent tax that has already been paid by the company distributing the dividend.
2. Review Your Taxable Income
The amount of tax offset you can claim often depends on your taxable income. For example, certain offsets like the Low- and Middle-Income Tax Offset are income-tested. By reviewing your taxable income, you can determine which offsets you qualify for and ensure you’re not missing out on potential savings. Consider whether any recent life changes, such as a new job or additional sources of income, might affect your eligibility for various offsets.
3. Keep Track of Your Expenses
Many tax offsets require proof of specific expenses, so it’s crucial to keep detailed records of any relevant out-of-pocket expenses throughout the year. For example, if you’re eligible for the Private Health Insurance Offset, you should keep a copy of your insurance policy and proof of premiums paid. If you’re claiming the Family Tax Benefit, ensure you have documentation of your children’s school fees and other eligible expenses.
4. Use the Tax Offset on Your Tax Return
Once you’ve identified the offsets you’re eligible for, the next step is to apply for them on your tax return. You’ll typically need to answer specific questions about your income, family situation, and other factors. Depending on the offset, you may need to provide additional documentation.
Be sure to take your time when filling out your tax return and double-check your information. It only takes one small mistake to cause delays or miss out on important offsets. If you’re unsure about anything, consider seeking assistance from a tax professional to ensure you’re claiming all the offsets you’re entitled to.
5. Maximise Your Offset with Additional Contributions
In some cases, you can increase the tax offsets you claim by making additional contributions. For instance, contributing to your superannuation fund can help you take advantage of additional offsets available for super contributions. Be sure to consult a financial advisor to understand how these contributions can work in your favour.
6. File Early and Avoid Mistakes
Filing your tax return as soon as possible gives you a better chance to receive your refund quickly. Plus, by filing early, you’ll have more time to correct any mistakes. Accuracy is crucial when it comes to claiming tax offsets. If you leave out or change some information, it could slow the processing of your refund or stop you from getting some offsets.
Conclusion
One of the best ways to lower your tax bill and get the most money back is to claim tax offsets. It is possible to make sure you get all the tax breaks you’re entitled to by knowing which deductions you can use, keeping track of your costs, and filing your tax return correctly. You may be able to lower your general tax bill with a tax offset if you have a low income, are a senior, or have private health insurance. Follow these ideas to get the most out of your tax return and get a bigger refund this year.
