Tax warning as Aussies boast about $4,000 refunds: 'Paid the wrong tax'

Yahoo

15-07-2025

An experienced chartered accountant has revealed why you shouldn't "celebrate" getting a huge tax refund. The start of the new financial year can mean you receive hundreds or even thousands of dollars back from the Australian Taxation Office (ATO) as a refund.
A poll of more than 6,700 Yahoo Finance readers found 45 per cent will be relying on this cash boost to pay for essential bills. But Two Sides Accounting's Natalie Lennon told Yahoo Finance you shouldn't be expecting much back at all if your affairs are fairly straightforward.
"I think everyone got used to the past couple of years when they were getting quite a bit back, whereas if you do get a large tax refund, it usually means you've paid the wrong tax throughout the year," she said.
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The government ended the low and middle-income tax offset in 2023, and many might not be able to claim work-from-home deductions if they've been forced back into the office.
Those are just some of the reasons why your refund might look different from years gone by.
But that hasn't changed the hype surrounding tax time.
People have been flooding social media with videos showing what the ATO has estimated they might receive once their tax return has been assessed, which is based on limited information.Some of the clips show individuals set for tax refunds of more than $4,000. Equally, there have been people posting screenshots showing they're only expected to receive a measly $6 or even less.
Lennon told Yahoo Finance that refunds were fairly common in Australia's tax system, but explained having a big tax refund "is not really something to celebrate".
She said that's because you could have had more money in your pocket throughout the year if you were taxed correctly, which you could have put towards essentials, savings, investments, or treats.
This was backed up by UNSW Associate Professor Ann Kayis-Kumar.
'It might sound counterintuitive but getting a tax refund isn't necessarily a good thing, it means the ATO has been holding onto your money over the year," she said.
"On the other hand, needing to pay the ATO money isn't necessarily a bad thing — it means you're earning more money than most other Australians."
More than 14 million people lodged a tax return last year, according to H&R Block, and approximately 10 million of them received a refund.
Finder research revealed the average refund anticipated is $1,519.
About 52 per cent of people will be putting this extra cash into their savings, while 19 per cent will use it to pay off household bills.
Fresh ATO data from the 2022-23 tax season showed Aussies claimed an average of $2,739 in work-related expenses, which was the highest average in at least a decade and was higher than the average amount claimed during the pandemic.
But many Aussies aren't sure what they can and can't claim at tax time.
Xero research discovered that while 58 per cent of Aussies made purchases in the previous financial year with the intention of claiming them as personal tax deductions, more than half (51 per cent) also admitted they were confused about deduction rules.
Two of the biggest areas of confusion centred around claiming car, transport and travel expenses claims (21 per cent), and working from home costs (21 per cent).
Almost one in five said they had previously tried to claim a deduction they weren't sure was actually eligible, and 21 per cent discovered the item they had purchased was ineligible only after submitting their tax return.
If you are confused about certain deductions, you can read from experts and Yahoo Finance contributors Ben Nash and Mark Chapman about some of the most forgotten and most popular deductions, depending on your profession.
Despite millions expecting to have a refund hit their accounts in the next few weeks, there could be a sizeable group who will be hit with a bill instead.
The Sharing Economy Reporting Regime has been expanded, and it means any company you make money from, be it Airtasker, Doordash, or YouTube, will report that income to the ATO.
Prior to this, you usually had to self-report these extra income streams, however, now it will all come pre-filled on your tax return.
"These rules apply to a broad range of services, not just the most well-known," CPA Australia tax lead Jenny Wong said.
"If you use a website to rent out a car parking space or your designer handbag, this income will be recorded, and you'll need to pay tax.'
These extra income streams could push you into a higher tax bracket, or it could see that refund you were expecting morph into a debt.
Wong predicted influencers and OnlyFans content creators could be in for the biggest tax bills because of the enormous amount of money they can make.
These creators have been reminded that they have to declare any gifts or gratuities they received been July 1 to June 30 as a form of payment.
You have to start paying tax on anything earned over $18,200.