Beware! Your tax refund may be significantly smaller than anticipated this year.

With interest rates continuing to rise, fuel prices reaching record highs, electricity and gas costs skyrocketing, and the price of essential food items increasing, many individuals are relying on their tax refund to alleviate some of the burdens of living expenses.

However, they might face disappointment. The government has implemented a significant change to the tax system this year that will exert downward pressure on the size of tax refunds. Specifically, they have eliminated the Low and Middle Income Tax Offset.

This tax offset, which provided a tax reduction of up to $1,500 for individuals earning up to $126,000, expired at the end of the previous tax year on June 30, 2022. Many taxpayers may not realize this until they file their tax returns this year and notice a significant decrease in their refund amount.

As a reminder, the LMITO was in effect for several years and granted a tax offset to low and middle-income earners, encompassing individuals with a taxable income of up to $126,000. The offset amount varied based on income levels: if earning less than $37,000, one received $675, and for incomes between $37,001 and $48,000, the offset increased gradually up to $1,500. Individuals earning between $48,000 and $90,000 received the maximum offset of $1,500. For incomes exceeding $90,000, the offset gradually phased out and disappeared after $126,000.

As a consequence of its elimination, low-to-middle income earners may experience a reduction in their tax refunds this year ranging from $675 to $1,500.