Tax Cuts 2019 – How do they affect your tax refund in 2020?

The tax rebates announced in 2019 carry over to 2020. Therefore, a lot of Australians also get a nice boost to their tax refund in 2020.

Owed a tax cut in 2020? How much money do the 2019 tax rebates really add to your 2020 tax refund?

The main point to remember is this:

You DON’T receive the tax rebate amount owed to you as a lump sum in your tax refund. The tax cuts reduce your taxable income, which increases your tax refund.

You don’t need to do anything to receive your 2019 tax rebate. The ATO allocates it to your account automatically.

Now let’s get into some details about how the 2019 tax cuts affect you in 2020.

“How Much Will I Get?”

2019 tax cuts mostly affect people on low to middle incomes. If you earn between about $21,000 to $126,000 then your tax refund could get a nice little boost in 2020. Importantly, the tax rebates are listed on your Notice of Assessment as the “low & middle income tax offset.”

Taxable Income	2019-2020 Tax Rebate Amount
$25,000	$255
$40,000	$480
$60,000	$1,080
$90,000	$1,080
$120,000	$180
$150,000	$0
$200,000	$0

You can see in the table above how people on high incomes seem to be ignored for 2019 and 2020. Anyone earning more than $126,000 will not see a change again in 2020. However, in future years, people with the biggest salaries will really rake it in – more about that down below.

“What should I do to get my tax rebate?”

Good news: You don’t need to do anything special.

Just lodge your tax return like normal. The change is automatic and included in your tax refund.

Already an Etax user? Just log in here. A few minutes is all it takes

New to Etax? You can create an account here, and it’s going to be easy!

Etax calculates your tax refund – including the 2019 tax rebates – and shows your refund estimate, right on your screen. It re-calculates for each bit of info you add. Etax automatically collects your income statement from the ATO, so you don’t need an income statement or PAYG when you do your Etax return. Also, Etax helps you remember items you can claim as deductions, to boost your refund even more.

“My Tax Cut Seems Too Small”

Okay, here’s where it gets a bit more complicated.

If you already did your 2019 tax return, or if you already started a return at Etax and checked your tax refund estimate, then you already saw an amount that included tax cuts. Remember, the tax rebates lower your taxable income. This does not necessarily mean you’ll receive an extra $1080 in your tax refund.

Some Taxpayers Still Owe Money to the ATO

Most Australians get a tax refund. But every year, some people pay tax instead.

The most common reasons are,

• An employer(s) didn’t deduct enough tax to cover what you should be paying the ATO.
• You had multiple jobs or sources of income and didn’t pay enough tax for your total income. For example, if you topped-up your income with Uber, AirBNB or some consulting work, all the income adds-up to a total taxable income. As your taxable income goes up, so does the percentage you pay in tax. If each employer knows about the other sources of income, they can adjust your tax withheld rate so your taxes are covered. But it doesn’t always work that way.
• You owed money to Centrelink or Child Support. The ATO automatically grabs your tax refund and sends it to pay for any Centrelink, Child Support or other government agency debt.

How Much Tax Cut Do You Get in the Future?

For people with low-to-mid incomes, the tax cut remains the same or increases slightly in coming years.

That means, next year your refund should be similar to this year (if other things like your tax deductions remain the same). The 2019 tax cut does not keep doubling-up each year.

For example,

• A person who earns $35,000 gets an extra $255 in the 2019 tax cuts and that remains the same all the way to 2024/5 – still $255.
• A person earning $60,000 gets an extra $1,080 for 2019 and that crawls up to $1,455 by 2024/5.

For people on high incomes, things keep getting better. High income earners get nothing in the 2019 tax cut. However, in the coming years, those people get a MUCH bigger tax cut than everyone else.

• A person who earns a hefty $190,000 doesn’t get anything extra with the 2019 changes. But pretty soon it’ll go up, a lot. By 2024/5 that person’s tax cut gives them an extra $10,140!

Future Details About the Tax Rebates

Technically, the new tax cuts are a tax rebate, not a cut in tax rates.

The new tax rebate is only temporary, for four years. That means it is gone in 2022, and at that point, “Stage 2” of the tax plan comes into effect.

Stage 2 sees no more tax rebates, but we still get a boost because tax offsets, tax brackets and rates change. Many people will be in a lower tax bracket from 2022 which means they will pay a lower rate of tax – this is an actual tax cut and not a rebate like in 2019.

Stage 3 of the plan comes in at July 2024. That’s when tax rates come down and give a big boost high income earners.

Summary About New Tax Cuts

• Tax cuts = a slightly bigger tax refund for most Australians started in 2019 continues in 2020.
• You don’t need to do anything special. Just lodge your tax returns as normal.
• In your Etax return, after you add the basic details and deductions, you can see a tax refund estimate including the latest tax changes.
• You do not need an Income Statement or PAYG in order to do your taxes – Etax will collect that (and lots more) to automatically pre-fill your tax return, saving you time and improving accuracy.

See more articles on Tax Deductions