Can you avoid giving money to the government at tax time?

You don't owe tax unless you earn or receive money. If you are an employee you have withholding taken from your wages. Therefore, it's not surprising that you would be shocked and unprepared if you have to give the government money at the end of the tax return process. But it happens.... This month in the April edition of the Mobility Matters newsletter I'll explore 6 reasons why you could owe and what you can do about it now.

1) Low and middle income earner tax offsets

All good things must come to an end. The LMITO provided thousands of taxpayers refunds in their tax returns between 2018–19 and 2021–22. You may have been eligible to receive the

• low and middle income tax offset – if you earned up to $126,000.

Bad news... LMITO ended on 30?June 2022.

The reason you may owe on your 2023 tax return may be due to the end of LMITO.

What can you do about it?

Unfortunately not much... other than plan for the offset of $1,500 to not be available and know that you may have to pay when you get your 2023 Notice of Assessment if you have income that has not been subject to accurate withholding.

2) Insurance

Medicare Levy Surcharge

To put it simply... you will have additional tax to pay if you earn above a threshold (dependent on your family size) and you don't have approved private health cover with an authorised insurer.

How much income? See below:

The thresholds will increase slightly in the 2024 tax year.

This one often catches out new entrants to Australia because they haven't been advised or have forgotten to take out cover.

What can you do about it?

• Do the math and decide if you will make the decision to get private health insurance. If it adds up... Take action today. Every day you aren't covered adds to the surcharge!
• Understand the implications of Lifetime Health Cover. LHC is a loading added to your hospital premium if you didn't have private hospital cover from the year you turn 31.

Private Health insurance rebate

The private health insurance rebate is a government contribution to help with the cost of your private health insurance. No surprise here...the rebate is income tested.

In helping a repatriating client I was horrified at how aggressive their insurer was with pushing the rebate even though they clearly earned in excess of the eligibility thresholds.

If they had gone along with that advice they would have received a request for the rebate to be returned on their Notice of Assessment.

What can you do about it?

• Advise your private health insurer that you don't qualify if your circumstances changed and you no longer meet the requirements. Eg You got a great new job and now earn more.

Below are the thresholds and rebate amounts.

3) PAYG Instalments

Pay as you go (PAYG) instalments are typically made quarterly and allow the ATO to collect expected tax debts in advance of the year ending.

You will automatically enter the PAYG instalments system if you have all of the following:

• instalment income from your latest tax return of $4,000 or more
• tax payable on your latest notice of assessment of $1,000 or more
• estimated (notional) tax of $500 or more.

You have the option to adjust the amount that you pay to reflect the actual income subject to PAYG instalments. If you don't vary up for increased income... you are going to owe.

What can you do about it?

• Quarter 3 PAYG instalments for the quarter ended 31 March will be due in April. No time like the present to consider the appropriateness of the amount that you are required to pay. Mine is already showing on my MyGov account ready for action.
• If you have Form R and have been advised an instalment amount to pay and your PAYG income has increased but you don't want to vary up. Be smart and save some cash for tax time.
• If you aren't sure how to figure it out contact a registered tax agent... like me.

4) Child Care Subsidy

For the parents out there this matters. The Child Care Subsidy percentage you’re entitled to depends on your family’s income. You can earn up to $530,000 and still get some of the subsidy.

Once you or your partner lodge tax returns, the ATO advises Services Australia of your income(s). They will then use this information to balance your CCS. My balance was due for repayment before my NOA was. They move quick!

What can you do about it?

• While there is a 5% withholding on your subsidy, if your income changes significantly you can adjust your family income estimate on MyGov.

5) Superannuation - Division 293

Division 293 is an additional tax on concessional contributions by high-income earners. For this purpose you are a high income earner above $250,000.

The tax is 15% of the excess over the threshold or the taxable super contributions, whichever is less.

What can you do about it?

This is another hard one to avoid, particularly if the contributions are mandatory concessional contributions from your employer. You can pay the tax from your superannuation balance but if you are keen to grow that then using it for tax might not be palatable.

Therefore, this is another one where you just have to plan for the tax expense and save up.

If you are catching up on unused concessional contributions over a 5 year period but earn over $250,000 the Division 293 hit can be HEAVY.

For the expats who don't plan to retire in Australia and will be subject to the Departing Australia Superannuation Payment of 35% you can seek assistance with your Division 293 notices. Send me a direct message if you are keen to engage us to assist.

6) Employee Share Scheme Income

I started his article by mentioning that you don't owe tax unless you have money. Employee Share Scheme (ESS) income feels like a great example of this at work but that can be a mirage depending on if you sell the shares at vest.

When you are granted shares or stock options from your employer, if they meet certain requirements the taxing point is deferred to a later point in time. That time is likely 'vest' or when the restrictions no longer apply and you can sell the asset.

You will need to pay tax regardless of when you actually sell the share. I like to think of this as the 1st taxing point that relates to the asset as an outcome of your employment. When you eventually sell the share capital gains tax will apply.

What can you do about it?

• Buy yourself some extra time to pay: Appointing a register tax agent when you have an up to date filing history (no outstanding tax returns) will give you an extension of time to lodge and pay till at least 31 March instead of 31 Oct.
• Plan ahead and save some cash for the tax. Remember the tax applies even if you haven't sold anything just yet.

American by birth, Australian by choice. Ursula Lepporoli has lived experience. She brings compassion and understanding to the tax and policy expertise she provides to expatriates and employers. Sharing knowledge with the wider mobility community brings her joy. With 18 years of Global Mobility experience she brings a strategic and practical perspective to every interaction. She prides herself on making tax fun but takes the responsibility of cutting through complexity seriously.?Follow her, and subscribe to the Mobility Matters newsletter here.

The views expressed above are mine alone and are not tax advice.